en
Back to the list

Curve DAO token plunges 14% under heavy short-selling pressure

DeFi

www.theblock.co 22 November 2022 12:19, UTC
  
Reading time: ~2 m

An unknown trader borrowed 70 million Curve DAO tokens (CRV), worth around $28 million, from Aave and sold the majority of them to drop the token's price.

The trader sold nearly all of the borrowed CRV tokens on centralized and decentralized spot exchanges, on-chain data shows. Typically short sellers will use a centralized perpetual trading platform, making this trader's short play unique.

The selling pressure triggered a sharp fall in price. The token crashed over 14% at one point, going from $0.52 to $0.43, according to CoinGecko. CRV was trading at $0.47 at 7:00 a.m. ET.

CRV chart by TradingView

If the price of CRV falls below $0.242, a total of 185 million CRV tokens, or 10% of Curve's circulating supply, would be liquidated on Aave, according to an estimate from DeFiLlama. If that happens, it may prove to be a catalyst that may further drive down the price of CRV. This could be part of the trader's strategy.

Short sellers bet the token price will fall to make a profit. Borrowing on lending platforms and selling tokens is a manual way to take a short position on a particular asset.

Alternatively, as the price rises, the risk of the short seller being liquidated rises. This is known as a short squeeze and happens when short traders are forced to close their positions by buying back the underlying token. This poses some risk to the trader's position.


   Source
Back to the list