Author: Climber, Golden Finance
On June 13th, Beijing time, Curve founder Michael Egorov's $140 million CRV loan position has begun to be liquidated as the price of the currency fell. As of writing, the positions on Egorov's five addresses have all fallen below the liquidation line, but only the main address has begun liquidation. However, the price of CRV has plummeted, with a maximum drop of more than 30% in a short period of time.
Last July, the founder of Curve also encountered a liquidation crisis. However, since it was caused by an external hacker attack, the crypto market launched a plan to assist Curve. Dozens of institutions and many Chinese tycoons such as Justin Sun, Du Jun and Maji Da Ge have provided financial assistance.
A year has passed in the blink of an eye, and neither financial assistance nor crypto bullishness seems to have saved Curve and its founder from liquidation.
Liquidation of $140 million positions is on the agenda
In the early morning of June 13, Arkham posted on X that Curve founder Michael Egorov is currently facing the liquidation risk of $140 million in CRV tokens. Egorov borrowed about $95.7 million in stablecoins, mainly crvUSD, with about $141 million in CRV tokens as collateral in five accounts on five different protocols. The annualized interest cost to maintain these loans is as high as $60 million.
Of that, $50 million of the loans came from Llamalend, with an annual interest rate of about 120%. Since there is almost no remaining crvUSD on Llamalend to borrow, Egorov's three accounts already account for more than 90% of the borrowing on the protocol. If the price of CRV drops by about 10%, these positions will be at risk of liquidation.
Unfortunately, with the decline of the crypto market and the partial influence of market FUD, the price of CRV fell. In less than an hour, the price of CRV plummeted by more than 30%, reaching a minimum of $0.219. This also directly triggered liquidation.
According to Lookonchain monitoring, Curve founder Michael Egorov is being liquidated. Michael currently holds 111.87 million CRV (US$33.87 million) in collateral and US$20.6 million in debt on four platforms.
However, according to monitoring by Ember, the loan positions of CRV pledged by the five addresses of Curve founder have all fallen below the liquidation line. Currently, the positions on the main address of Egorov (0x7a1...428) are being liquidated, and the positions on the remaining addresses have also fallen below the liquidation line, but have not yet started liquidation.
According to the monitoring of on-chain data analyst @ai_9684xtpa, the founder of Curve has been liquidated 29.62 million CRV, and the address 0xF07...0f19E is one of the main liquidators. The user of this address liquidated 29.62 million CRV at an average price of $0.2549, spending a total of 7.55 million FRAX. At present, all of these tokens have been recharged to Binance.
In addition, due to the decline in CRV prices, some investors had 10.58 million CRV (US$3.3 million) liquidated on Fraxlend.
Currently, the positions on the Egorov main address (0x7a1...428) show that the number of CRV is about 2.22 million, and the total value of the wallet is about 1.04 million US dollars.
The liquidation of Curve's founder and the plunge of CRV also led to concentrated selling. According to The Data Nerd, a whale deposited 10.926 million CRV (about 2.7 million US dollars) into Binance. In 1 hour, he deposited a total of 24.2 million CRV (about 6.936 million US dollars) into Binance. CryptoQuant CEO Ki Young Ju also posted that the exchange's CRV balance hit a record high, up 57% in the past two hours.
Institutional celebrities failed to rescue
In late July 2023, due to a reentrancy vulnerability caused by the Vyper programming language, four CurveFinance mining pools were hacked, with a total loss of approximately $70 million. This also directly led to a huge liquidation risk for the founder of Curve.
However, since this was a malicious hacker attack, many forces in the crypto market have expressed their support for Curve. In addition to Egorov selling more than 106 million CRV tokens to 19 institutions and investors to raise funds, crypto celebrities such as Justin Sun, Du Jun, and Maji Da Ge also purchased CRV.
Justin Sun bought 5 million CRV tokens, Du Jun purchased 10 million CRV with a total of US$4 million, and Maji bought 3.75 million CRV tokens with US$1.5 million, and pledged all of them for 6 months.
Regarding the Curve project, Du Jun said, "Many people asked me why I supported Curve, just like when BendDAO encountered a liquidity crisis in 2022, we immediately communicated with the project team to provide support." "These are truly innovative projects and the industry's infrastructure. The current difficulties are only temporary. If we support them together, the industry will be healthier."
With financial assistance from multiple institutions and Chinese tycoons, Egorov's OTC fundraising transactions went smoothly, and Curve's debt health on major DeFi platforms also improved, with the health factor rising to 1.87 on Aave V2 and 1.8 on Fraxlend.
According to public information, in August last year, Michael sold 159.4 million CRV to 33 investors/institutions in an over-the-counter (OTC) transaction in order to avoid liquidation due to the decline in CRV prices. He obtained 63.76 million stablecoins to repay the loan at a selling price of US$0.4.
But in September of that year, Curve's trading volume plummeted by 97%, and its project token CRV has also been falling ever since.
It is worth noting that on June 13, the lending positions of the Curve founder went from warning to formal liquidation very quickly. However, in fact, the lending positions of the Curve founder on various platforms had entered a dangerous zone in April of this year, and the lending health rate of many positions had dropped to around 1.1.
In April, the crypto market fell back, altcoins generally fell sharply, and the price of CRV also fell to around $0.42. This also means that Curve founder Michael Egorov's lending position has entered the red line again.
At that time, Egorov pledged a total of 371 million CRV (US$156 million) on 6 lending platforms through 5 addresses and borrowed US$92.54 million in stablecoins.
Due to the decline in CRV prices, Egorov's lending positions on various platforms have now entered the danger zone again. The lending health rate of multiple positions has dropped to around 1.1 (i.e., if the CRV price continues to fall by 10% without replenishment or repayment, liquidation will begin).
Two months later, it became clear that the Curve founder had not made adequate preparations, which ultimately led to the rapid liquidation of his lending positions.
Conclusion
It seems that the liquidation of the loan positions of Curve founders was destined. The crypto market's bearish turn to bullish, a year of recovery, and the influx of massive funds have not reversed the future. The price of CRV has also been going lower and lower. This good project that was once supported by capital and supported by the platform ultimately hurt the investors.
In this regard, some community members said that Curve’s operations were similar to traditional finance. Since it was impossible to sell off shares on a large scale, it chose to pledge them. When the stock price fell, the bank was forced to liquidate its positions, and the founder was forced to make a fortune.