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Last weekend, the decentralized finance (DeFi) protocol Curve Finance (CRV) suffered a severe blow in an attack, leading to a drop in multiple DeFi altcoins in the market. Experts warn that the drop, which has shaken many DeFi altcoins, could further escalate.
Curve Finance Incident Could Cause a Domino Effect in the DeFi Sector
The native asset of Curve Finance, CRV, has lost 25% of its value in the past three days due to the recent attack on the platform. The fact that the project’s founder, Michael Egorov, has borrowed over $100 million in collateral using CRV in various crypto lending projects increases the potential impact of the drop. This situation has raised concerns that CRV could further decline, leading to the forced liquidation of Egorov’s credit positions and potentially causing additional losses.
Stefan von Haenisch, Head of Sales Trading at OSL SG Pte in Singapore, commented on these concerns, stating, “If the price goes even lower and reaches these liquidation levels, we could see a domino effect throughout the DeFi sector.” In an email sent to Bloomberg, Egorov stated, “We and I personally are working to minimize or eliminate the impact,” adding that he also plans to reduce the amount of credit he uses.
Curve Finance is currently the second largest decentralized exchange in the market after Uniswap (UNI). According to DeFiLlama data, the value of cryptocurrencies used in Curve Finance services dropped from $3.6 billion to $1.9 billion after the attack.
According to DeFiLlama data, the decrease in the CRV token to $0.375 will cause a significant portion of Egorov’s collateral to be liquidated.
DeFi Altcoins Fall Alongside Curve Finance
Many in the DeFi community view Curve Finance as one of the most important liquidity providers, especially for stablecoins, and emphasize its significance for the DeFi sector. Indeed, the events at Curve Finance have caused significant drops in mainstream DeFi altcoins. In the past 24 hours, COMP dropped by 18.19% to $61.98, CVX dropped by 13.92% to $2.94, FXS dropped by 13.11% to $5.16, and AAVE dropped by 12.63% to $62.14.
Furthermore, the Curve Finance incident has also exerted some selling pressure on the rest of the cryptocurrency market, not just DeFi altcoins. The price of the largest cryptocurrency, Bitcoin (BTC), easily dropped below $29,000 due to a significant decrease in trading volumes. The top ten altcoins by market capitalization have also experienced consecutive declines of 5% and more in the past two days.
