Michael Egorov’s $100 Million Position, A Risk To Curve Finance And DeFi?

Following the latest exploit of Curve Finance swimming pools, there have been real considerations in regards to 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 vital curiosity, as they’re backed by about 47% of your complete CRV circulating provide. With the value of CRV dwindling, these money owed look like susceptible to liquidation, placing the Curve protocol, CRV buyers, 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 collection of tweets, detailing the mortgage positions being held by Michael Egorov. Based on 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 at present trades at $0.608595, in response to CoinGecko knowledge. Because of this 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 way decrease than his Aave place, it poses a way more vital threat to CRV on account of Fraxlend’s Time-Weighted Variable Curiosity Charge.

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

Whereas the rate of interest at present stands at 81.20%, Delphi Digital mentioned that it could actually probably enhance to the utmost of about 10,000% APY in 3.5 days. This high-interest price might consequence within the eventual liquidation of the debt.

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

How Has The Curve Finance Founder Responded?

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

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 finally cut back the liquidation dangers.

Based on Delphi Digital, this pool attracted $2 million in liquidity and lowered the utilization price to 89% 4 hours after launch.