Author: Grapefruit, ChainCatcher
Editor: Marco, ChainCatcher
On the evening of June 13, Arkham published a statement saying that Curve founder Michael Egorov’s lending positions worth nearly nine figures ($141 million CRV) had been completely liquidated, and a total of more than $1 million in bad debts had been generated on Curve’s lending platform Llamalend.
In response to the liquidation storm, Curve founder Michael Egorov posted on social media that day that the Curve team and I have been working hard to resolve the liquidation risk issue today. As everyone knows, all of my loan positions have been liquidated.
He also added that due to the large size of his holdings and the huge impact on the market, he resulted in about $10 million in bad debts, but 93% of them have been repaid and the remaining bad debts will be repaid soon.
At this point, the 12-hour liquidation storm seems to have been paused, and the CRV coin price has remained fluctuating around $0.28.
However, the reasons that led to the large-scale liquidation of CRV loan positions are still worth further investigation, and the founder Michael Egorov's indifference to the liquidation and his calm behavior of "not replenishing positions or rescuing" are even more surprising, so that the community questioned whether he was selling CRV for cash through mortgage loans?
The liquidation of $ 141 million CRV may be expected
As early as two months ago, the founder Michael Egorov was warned of potential liquidation risks for his CRV position on the lending platform, but Michael Egorov did not take any action, neither covering his position nor returning the borrowed stablecoin assets. When CRV was liquidated this time, it was not surprising, as if it had been expected.
On the morning of June 13, the data platform Arkham issued a reminder that Curve founder Michael Egorov had a position on five lending platforms with $141 million of CRV pledged to borrow $9,570 in stablecoins (mainly crvUSD). As the CRV token falls, it will face the risk of being liquidated.
Arkham pointed out that if the price of CRV drops by about 10% again, Michael Egorov’s positions are likely to start being liquidated.
Subsequently, the CRV token plunged from $0.35 to a low of $0.21, with the intraday decline exceeding 40% at one point, setting a new historical low.
Michael Egorov’s CRV lending positions on multiple lending platforms including Inverse and UwU Lend all fell below the liquidation line, entering liquidation mode.
On the evening of June 13, Arkham posted a message saying that the $141 million (worth about nine figures) loan position on Michael Egorov’s address had been completely liquidated.
In fact, as early as two months ago, Michael Egorov’s CRV mortgage loan position was prompted to have entered the danger zone and faced the possibility of liquidation.
On April 14, on-chain data analyst Yu Jin posted on social media that as the market fell, the price of CRV also fell to $0.42, and Michael Egorov's lending position also entered the red line danger zone again.
According to monitoring, Michael used 5 addresses to mortgage a total of 371 million CRV on 6 lending platforms including Curve LlamaLend, UwU Lend, Silo and FraxLend, and lent out $92.54 million in stablecoins, with a total of 12 debts. Among them, the health rate of multiple positions has dropped to around 1.1. According to speculation, if the CRV price continues to fall by 10% without replenishment or repayment, liquidation will be initiated.
That night, the price of CRV fell to $0.35, having already fallen 10% below $0.42. But strangely, Michael Egorov's loan position was not liquidated, and he did not seem to have taken any remedial measures.
There are two views on why it was not liquidated. One is that the oracle price lagged and may not have tracked the liquidation price. The other is that the liquidation mechanism of the lending platform Silo is manual liquidation, not automatic liquidation. Even if the price reaches the liquidation line, if it is not manually executed, the liquidation does not actually occur.
Michael Egorov seemed to be lucky enough to avoid the liquidation in April and his positions were not threatened in any way.
However, facing his precarious position, he did not take any countermeasures in the past two months. So when the price of CRV fell again due to the overall decline in the crypto market, the liquidation of Michael Egorov's CRV loan position was expected.
Michael Egorov is suspected of selling CRV through borrowing
Faced with this large-scale position liquidation of CRV, the performance of founder Michael Egorov was even more surprising. He did not make any statement during the entire liquidation process, and was even indifferent. He neither took the initiative to cover his positions nor took any remedial actions. On the morning of June 13, when the position liquidation occurred, he joked with users in the Frax Finance community, saying that his mental state was very healthy.
During the CRV liquidation crisis in August last year, in order to avoid liquidation caused by the decline in CRV prices, Michael Egorov took the initiative to cover his positions and sold 159.4 million CRV to 33 investors or institutions through OTC transactions in exchange for 63.76 million stablecoins to repay the loan and save his positions.
Compared with the last time when he quickly returned part of the funds on various lending platforms and increased the CRV collateral status, Michael Egorov was unusually calm in the face of the liquidation of the $141 million CRV position this time. He neither actively sold CRV on the OTC to repay the loan nor transferred part of the previously lent stablecoins back to repay the loan. His calmness was unusual.
Some users questioned whether this liquidation was a long-planned cash-out method by Michael Egorov. After liquidating $141 million of CRV positions, he finally obtained about $100 million of stablecoins, and as the price of CRV fell, the loss seemed to be less than 30%. If he had directly dumped $141 million of CRV into the secondary market, with the current liquidity of CRV, the loss might be more than 30%, and he would also be accused of dumping the market.
Regarding the liquidation of CRV positions, Ethereum core developer eric.eth said that the founder of Curve did not suffer any "loss" due to the liquidation of CRV. He earned $100 million from a CRV position worth $140 million, and selling it on the market would result in a similar price and cause dissatisfaction in the community.
User @0x_Kun said in a comment that if $140 million worth of CRV is sold on the secondary market, there will be crazy slippage. Michael Egorov used collateral to obtain US dollar stablecoins. Although the liquidation lost about 30% of the collateral, he ultimately obtained $100 million.
He added that collateral liquidation is a win-win cash-out strategy for Michael Egorov. If the price of CRV rises, he only needs to borrow more money. If the price falls, it will be liquidated, but he can keep all the borrowed money.
Youtube blogger @sassal.eth commented, "You didn't have to buy the mansion," mocking Michael Egorov's position liquidation behavior, saying it was no different from his previous cashing out of VC coins to buy a mansion.
CRV liquidation aftermath: Investors suffer
Regardless of whether this CRV liquidation was a premeditated sell-off or an unintentional act, the impact of the liquidation of hundreds of millions of dollars on the crypto market cannot be underestimated, especially for Curve-related investors, which has affected multiple lending institutions.
Among them, the sharp drop in CRV prices also triggered the liquidation of positions on other lending platforms. According to Lookonchain data, a user had 10.58 million CRV liquidated on Fraxlend, worth US$3.3 million.
In addition, all OGs, institutions and VCs who participated in the “Curve Defense War” last year, such as DWF and Huang Licheng, who bought CRV tokens at $0.4 in the OTC market, are now in a loss as CRV fell to a historical low.
Of course, in the face of this liquidation storm, some people supported and profited. For example, Christian, co-founder of the crypto fund NDV and NFT whale, said that he received 30 million CRV from Michael Egorov to support the future of Curve and DeFi. It is reported that Christian bought about 6 million US dollars of CRV off-market, that is, the price of each CRV token was 0.2 US dollars. According to the current price of 0.28 US dollars, the book profit is about 40%.
Since the founder of Curve was attacked by VC institutions in March last year and his VC coins were seized, and the Curve platform cashed out to buy a luxury house, the crisis has been one after another. It was attacked by hackers in July of the same year, and was prompted with liquidation risks in April this year. Now, $141 million of CRV positions have been liquidated, and so on.
Curve, once one of the top two DeFi products on par with Uniswap, has been on a downward trend. Some people attribute this to the development difficulties of the DeFi track, but more people believe that Curve is a good hand that was ruined by Michael.
According to DeFiLlama data, as of June 14, the TVL locked on the Curve platform has dropped to US$2.27 billion. Compared with the 2022 high of US$23 billion, the TVL has shrunk to less than one-tenth of the original, and its ranking in the DeFi market has also dropped to outside the top 15.
