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Crypto investors will recall yesterday’s drop in CRV price. The $0.2190 level was historically the lowest point for the token. In response to the drop, Arjham warned that the Curve founder was close to liquidation. Now, the founder is taking steps to extend the liquidation process. Let’s look at the details.
Arkham Warned
According to Arkham, significant financial maneuvers and potential risks have emerged involving Michael Egorov and his participation in CRV and stablecoin borrowing. Curve Finance’s founder Egorov currently holds approximately $141 million worth of CRV tokens across multiple accounts in different protocols.
To finance his operations, he borrowed about $95.7 million, primarily in crvUSD, a stablecoin pegged to the US dollar. This borrowing strategy comes with a significant cost: Egorov pays approximately $60 million annually to maintain these leveraged positions, primarily through Llamalend.
High Cost
The interest rates he faces are quite high, with some loans having an annual percentage yield (APY) around 120%. This high cost is attributed to the scarcity of crvUSD available for borrowing against CRV on Llamalend, exacerbated by Egorov’s borrowing, which collectively constitutes over 90% of the crvUSD borrowed on the platform.
The instability of Egorov’s position is highlighted by its vulnerability to market fluctuations, particularly a potential 10% drop in CRV token prices. Such a drop could trigger the liquidation of his leveraged positions, forcing the sale of CRV tokens to cover outstanding debts.
According to Spot on Chain, this scenario has prompted Egorov to take urgent measures to mitigate liquidation risks. Recent transactions indicate that he sold a significant amount of CRV and another token, UWU, likely to support liquidity and extend the stability of his position.
What Transactions Did Egorov Make?
In a series of transactions over a short period, Egorov converted approximately 3.1 million CRV tokens into 810,000 USDT (Tether). He also swapped UWU tokens for more CRVUSD and converted UWU and USDT into additional CRVUSD. These moves demonstrated a strategic effort to manage liquidity and potentially extend the timeline before any liquidation occurs.
The dynamics at play highlighted the complexity of decentralized finance (DeFi) and the risks associated with leveraging significant amounts of tokens. Egorov’s actions underscored the importance of balancing asset utilization to maximize returns with the inherent risks of exposure to volatile markets and high borrowing costs.
