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The Curve Finance DeFi stablecoin protocol is on shaky ground at the moment as the bad crypto news keeps coming. Large amounts of CRV tokens are at risk of liquidation as an account believed to belong to the founder has run up a huge debt position.
On June 15, it was reported that an account believed to be owned by the Curve Finance founder had a $110 million leverage position against his CRV holdings.
Furthermore, Michael Egorov also controls a huge percentage of the circulating supply, according to ‘@apes_prologue,’ a crypto analysis feed with 30,000 followers.
Curve Finance DeFi Debt Concerns Growing
The DeFi analyst added:
“This could have severe implications for DeFi, with lending protocols at risk of accruing bad debt.”
On-chain analyst ‘@trading_vapor’ confirmed the $110 million debt position.
If liquidation occurs, there isn’t enough on-chain liquidity to market sell the position without drastically affecting CRV prices, added ‘@apes_prologue.’
“This would likely lead to bad debt across lending protocols, including Aave, Frax, and Abracadabra.”
The move has caused financial modeling platform Gauntlet to propose a freeze on CRV loans for the account. Citing risks to lending platform Aave, it said:
“This account borrows roughly $67.7 million of stablecoins ($67m USDT, $700k USDC) against $185m of CRV and $4m of TUSD.”
It noted that CRV token liquidity has decreased by 50% over the past couple of months, both on-chain and globally. “This can cause future risk, especially if the CRV used as collateral by this account continues to grow,” it added.
Nevertheless, the proposal has caused controversy among the DeFi community as some believe it violates the core ethos of DeFi, which is neutrality.
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Furthermore, Lookonchain has been delving into recent transactions from the Curve founder’s account, with millions being moved around over the past day.
Earlier this week, Adam Cochran commented, “people trying to short CRV to liquidate the founder is funny.” He has 24%, and it is “one of the most locked/DAO owned coins” with only “15% free float available to sell,” he added.
Furthermore, the DeFi platform launched its own crvUSD stablecoin in May.
CRV Price Tanks 11%
Either way, the price of the Curve DAO token has dropped almost 11% over the past 24 hours. As a result, CRV was trading at $0.576 at the time of writing.
Furthermore, the DeFi token is down 23% over the past week. Prices are down 96% from their all-time high of $15.37 in August 2020.