CRV danger? A Glimpse of Curve's Founder's $170 Million Position

Author: Delphi Digital, an encryption research organization; Compiler: Leo, Bob, BlockBeats

The founder of Curve Finance, Michael Egorov, has always been a well-known “borrowing and cashing out” accountant. Egorov also often conducts CRV mortgages and stablecoin loans on Aave and Frax. However, due to the recent drop in CRV prices and the use of its pool, CRV prices have plummeted , as of the publication, the price of CRV is about 0.5 US dollars, with a drop of more than 20% in 24 hours, leading to a sharp increase in the risk of Egorov CRV-mortgaged loans being liquidated. Delphi Digital wrote an article on "Curve's Founder's Loan Forced Liquidation Price and the Impact of CRV Plunge on the DeFi Field", compiled by BlockBeats as follows:

Yesterday, several Curve Finance pools were utilized, and Curve founder Michael Egorov currently has a loan of about $100 million secured by $427.5 million in CRV (about 47% of the entire circulating supply of CRV). With CRV down 10% over the past 24 hours, Curve's health is at stake.

On lending protocol Aave, Egorov has $63.2 million in USDT loans backed by $305 million in CRV.

Under the 55% liquidation standard, his position will be liquidated when CRV reaches the price of 0.3767 USDT.

Judging from the current CRV price, reaching the liquidation standard only requires a 33% drop in the CRV price. In addition, Egorov paid an annual APY of 4% on the loan.

On Frax Finance, Egorov currently has 59 million CRV, corresponding to a FRAX loan of 15.8 million US dollars.

Although this is much less than his CRV collateral and stablecoin borrowing on Aave, CRV still carries a lot of risk due to Fraxlend's time-weighted variable interest rate.

At the current 100% utilization rate, the rate will double every 12 hours.

The current rate is 81.20%, but the APY is expected to top out at nearly 10,000% in 3.5 days.

No matter how the CRV price moves, this exponential rate could lead to his eventual liquidation. With a maximum LTV of 75%, the liquidation price of his position was $0.517 (CRV) within 4.5 days, which is only a 10% drop from the current CRV price.

Egorov made two attempts to reduce debt and utilization, and he repaid a total of 4 million FRAX (3.5 m, 500 k) in the last 24 hours. However, the market utilization remains at 100%, and the user withdraws liquidity soon after he repays.

Given the existing low liquidity, these large risk positions pose a serious concern for the CRV price.

There is currently about $10 million in CRV liquidity on-chain, and there is a $370,000 sell order with a depth of -2% on Binance.

The size of these risky positions can reach eight figures.

As a result, CRV prices have the potential to plummet to extremely low levels, triggering a ripple effect across much of the DeFi ecosystem.

Today, Curve founder Michael Egorov deployed a new Curve pool and threshold: a 2 pool consisting of crvUSD and Fraxlend's CRV/FRAX LP tokens, and injected $100,000 of CRV incentives into it.

This CRV/FRAX LP token is the same liquidity he borrowed on Fraxlend and is the biggest risk he faces in a potential liquidation.

This is an attempt to incentivize liquidity into the lending market in order to reduce utilization and reduce the risk of debt spiraling out of control.

Within 4 hours of launching, the pool had attracted $2 million in liquidity and reduced utilization to 89%.

We will be actively monitoring the situation in this thread, be sure to bookmark it.

Delphi members can keep up to date with the latest Alpha Feed post by Eason Wu, available here.

larry 0x has also put together some charts that we would like to share.

Worth noting: These charts assume that positions do not change (no collateral increases or debt repayments), CRV prices do not change, and utilization remains at 100% throughout.

Rate vs. Time (hours)

Debt ($Millions) vs. Time (Hours)

Health factor vs. time (hours)

Liquidation Price (USD) vs. Time (Hours)