Michael Egorov’s $100 Million Place, A Threat To Curve Finance And DeFi?

Following the current exploit of Curve Finance swimming pools, there have been real issues concerning the stability of the decentralized change and the Decentralized Finance (DeFi) ecosystem. A brand new report has emerged, elevating questions on Curve founder Michael Egorov’s $100 million mortgage positions.

These positions have garnered important curiosity, as they’re backed by about 47% of the complete CRV circulating provide. With the worth of CRV dwindling, these money owed look like susceptible to liquidation, placing the Curve protocol, CRV traders, and the general DeFi area on edge. 

A Breakdown Of Michael Egorov’s $100 Million Mortgage

On Tuesday, August 1, crypto analysis agency Delphi Digital launched a sequence of tweets, detailing the mortgage positions being held by Michael Egorov. In line with the report, the Curve Finance founder has round $100 million in loans throughout numerous lending protocols backed by 427.5 million CRV tokens.

Egorov has a 63.2 million USDT mortgage backed by 305 million CRV tokens on Aave.  Delphi Digital revealed that the place has a liquidation threshold of 55% and is eligible for liquidation at 0.3767 CRV/USDT.

For context, the CRV presently trades at $0.608595, in line with CoinGecko information. Which means that a 38% worth decline will trigger a liquidation of Egorov’s place on the Aave protocol.

In the meantime, the Curve founder has 59 million CRV backing a mortgage of 15.8 million FRAX on Frax Finance. Though this debt is far decrease than his Aave place, it poses a way more important threat to CRV as a consequence of Fraxlend’s Time-Weighted Variable Curiosity Price.

Delphi Digital additionally famous that liquidation of the Frax mortgage place can happen no matter CRV’s worth. In line with the analysis agency, the mortgage is presently at 100% utilization, which permits the rate of interest to double each 12 hours.

Whereas the rate of interest presently stands at 81.20%, Delphi Digital stated that it may doubtlessly improve to the utmost of about 10,000% APY in 3.5 days. This high-interest fee may outcome within the eventual liquidation of the debt.

CRVUSDT buying and selling at $0.598 | Supply: each day CRVUSDT chart from TradingView

How Has The Curve Finance Founder Responded?

Thus far, Michael Egorov has tried to stabilize his positions and the utilization fee twice, repaying a complete of 4 million FRAX on July thirty first. Nonetheless, the utilization fee remained at 100%, as customers swiftly take away liquidity as quickly as he makes the fee.

To deal with this, the Curve founder deployed a brand new Curve pool on Tuesday, August 1. This pool consists of stablecoin crvUSD and Fraxlend’s CRV/FRAX LP token, seeded with 100,000 CRV rewards. 

That is to incentivize liquidity towards the lending market, lower the utilization charges, and in the end cut back the liquidation dangers.

In line with Delphi Digital, this pool attracted $2 million in liquidity and lowered the utilization fee to 89% 4 hours after launch.