CRV loans on Fraxlend face potential liquidation problems and prisoner's dilemma, triggering market panic and causing a decline in Curve's total locked value. However, with a reasonable strategy and continued efforts, Fraxlend's problems can be solved without having to sell CRV.
The cryptocurrency market has always been full of uncertainty and volatility. Recently, CRV loans on Fraxlend have encountered a series of challenges, causing market panic. However, this problem has a solution. This article will analyze the potential liquidation problem and prisoner's dilemma of CRV loans and explore possible solutions.
CRV loan situation on Fraxlend Currently, the utilization rate of CRV loans on Fraxlend remains at 99.99%, and the borrowing interest rate has reached 17%. This is due to the design of Fraxlend's interest rate curve. Once the utilization rate reaches 100%, the interest rate will not soar immediately, but will gradually rise through the "half-life". This means that if the debt is left unattended, the borrowing interest rate will increase rapidly until it reaches an annualized interest rate of 10,000%, and the daily interest rate will reach 27%, and will be compounded continuously.
Solution: Repayment and Fund Adjustment However, there is still plenty of time. We only need to reduce the utilization rate to below 85%, and we need to repay about 3 million U to solve the problem. Although some depositors may need to leave, overall, there is still enough time to solve the problem. In the worst case, the entire debt of about 20 million U needs to be repaid. This incident did cause a certain degree of panic, causing Curve's total locked value (TVL) to decline, but it will take some time to restore confidence. However, through a reasonable repayment strategy and fund adjustment, the problem can be solved.
It is worth noting that CRV is now distributed on several different lending platforms, and there is still 33% room to go before the liquidation price, so a huge sell order is needed. If everyone maintains the current status quo, the problem may not be too big, but once one company wants to change the status quo, there may be whistleblowing behavior similar to the prisoner's dilemma, that is, liquidating the CRV position in advance, which is helpful for individual safety but not conducive to the overall.
Taking all factors into consideration, it is hoped that Michiwill can resolve the Fraxlend issue without selling CRV. This may require coordinating the actions of all relevant parties to ensure the stability and security of the entire system.
Although CRV loans on Fraxlend face potential liquidation issues and prisoner's dilemma, the problem can be solved through reasonable repayment strategies and capital adjustments. There is still enough time and opportunity to meet the challenges. The most important thing is to coordinate the actions of all parties to maintain the stability and security of the entire system. I hope that through wise decisions and continued efforts, Fraxlend's problems can be satisfactorily resolved, bringing more stability and confidence to the entire cryptocurrency market.
