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In a report published earlier today, the blockchain intelligence firm Kaiko noted that the CEO of Curve Finance, Michael Egorov, deposited $35 million worth of CRV to Aave V2 in 3 large transactions over the past few weeks. According to the firm, these deposits may be an attempt to protect his large lending position on DeFi lending protocols from liquidation.
Last week, some observers raised concerns about a large lending and borrowing position on Aave, totaling about $200mn $CRV and $60mn $USDT.
— Kaiko (@KaikoData) June 22, 2023
But how concerned should we really be?
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According to Kaiko, this is not the CEO’s first time utilizing DeFi lending and borrowing protocols. In addition, the CEO’s latest CRV deposits on Aave V2 are by no means his largest made on the DeFi platform, noted the blockchain intelligence firm. Kaiko revealed that Egorov currently has 200 million CRV tokens deposited on Aave V2 which is backing a loan of 60 million USDT.
Kaiko suspects that Egorov’s latest deposits are an attempt to protect his position and avoid liquidation. Interestingly, they highlighted the fact that the CEO’s current position is one of the largest in DeFi’s history. In addition to this, Egorov’s wallet is responsible for nearly 95% of the CRV deposited on Aave V2.
This large position is concerning for the DeFi space, given that there may not be enough liquidity to back the position up. In Egorov’s scenario, liquidators would most likely engage in a series of actions: exchanging ETH for USDT, using USDT to repay the borrowed amount, acquiring CRV tokens, and finally swapping CRV back to ETH.
The profitability of this process hinges on the ability to sell the received CRV tokens at a fair price promptly. However, a wave of liquidations exerting selling pressure could potentially cause a decline in the value of CRV, according to the blockchain intelligence firm. This decline may even reach a point where the collateral is valued lower than the borrowed tokens.
At press time, the single largest source of liquidity for CRV was on Curve itself in the CRV-ETH pool, which stood at around $50 million Total Value Locked (TVL), according to the report. Meanwhile, Uniswap V3 had approximately $4.5 million across all of its CRV pools.
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