Curve liquidation risk poses systemic threat to DeFi even as founder scurries to repay loans
On July 30, Curve Finance, a decentralized exchange on Ethereum, suffered a hack due to a vulnerability in specific pools built using the Vyper shows language.The rate of Curve DAO (CRV) dropped 20.91% on the day of the hack, falling to a two-month low of $0.58. The next day, the decrease in CRV continued to a seven-month low of $0.48 amidst worries of liquidation of large loans worth $100 million taken by Curve Financing founder Michael Egorov versus CRV as collateral.However, positive advancements such as partial payment of loans and substantial unfavorable bets in the derivatives market suggest that CRV might rally in the short term.The DeFi community comes to conserve CRV On Aug. 1, Egorov offered 39.25 million CRV tokens for stablecoins to a number of noteworthy decentralized financing financiers like Justin Sun, Machi Big Sibling and DWF Labs for an overall of $15.8 million, according to Lookonchain data.More and more financiers and organizations bought $CRV by means of OTC!Machi Big Brother bought 3.75 M $CRV.DWF Labs bought 2.5 M $CRV.https:// t.co/ MQg382LigF bought 2.5 M $CRV … Michael Egorov has sold a total of 39.25 M $CRV through OTC and received 15.8 M $USDT.https:// t.co/ hQBlW5WG6J pic.twitter.com/NMIQ2p05ZL— Lookonchain (@lookonchain) August 1, 2023
The buyers bought CRV at $0.40 per token, a 25% discount to the market rate at the time.Egorov also partly paid his Tether (USDT) loans on Aave, lowering the principal from $63.20 million to $54.1 million, per DeBank information. The partial repayment of the loan comes as a favorable action in minimizing the liquidation risk.Currently, Egorovs loans on Aave will be liquidated if the CRV cost falls to $0.36 or lower, per DefiLlama.Related: Vyper vulnerability exposes DeFi community to stress testsCRV price analysis The derivatives position of CRV traders suggests that the token may rally in the short-term as a contrarian bet.The financing rate for CRV perpetual swaps, which represents the relative need for long or short positions, shows traders are actively shorting CRV, as its financing rate fell to -0.1% for eight-hour intervals, per CoinGlass information. It raises the possibility of a brief capture in the market, where brief holders are forced to buy CRV as its rate rallies.The CRV/USD set is trending near multiyear lows at around $0.50. The rate can rally in the short to medium term towards the horizontal resistance levels of $0.78 and $1.23 if purchasers are able to construct support at this level. CRV/USD rate analysis. Source: TradingViewA long trade definitely features threats, as the hackers are still sitting on 7.1 million CRV tokens worth $4.5 million. If the assaulters transform their holdings into stablecoins or more liquid tokens such as Bitcoin (BTC) or Ether (ETH), the rate may review todays low, around $0.48. Additionally, while Egorov has lowered the liquidation danger a little, the danger is still not gotten rid of entirely. This post does not include investment recommendations or recommendations. Every investment and trading move involves risk, and readers ought to perform their own research study when deciding.
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