Curve Finance founder's $100M debt could trigger a DeFi implosion: Report
While Curve Finance is still weathering the aftermath of the recent $47 million hack, another issue concerning holders of the decentralized finance (DeFi) protocol’s token has surfaced on the internet, sparking theories on how a massive dump can potentially happen.
On Aug. 1, crypto research firm Delphi Digital published a Twitter thread detailing the loans taken by Curve Finance founder Michael Egorov that are backed by 47% of the circulating supply of Curve DAO (CRV). According to the research firm, Egorov has around $100 million in loans across various lending protocols backed by 427.5 million CRV.
1/ Yesterday, several @CurveFinance pools were exploited.Curve founder, Michael Egorov, currently has a ~$100M loan backed by 427.5m $CRV (about 47% of the entire CRV circulating supply).With $CRV down 10% over the past 24 hours, the health of Curve is in jeopardy. ⬇️ pic.twitter.com/EKpQCkDs6W
On Aave, Egorov has 305 million CRV backing a 63.2 million Tether (USDT) loan. Delphi Digital noted that at a liquidation threshold of 55%, the position is eligible to be liquidated at $0.3767. At the time of writing, CRV trades at around $0.5975. This means that a 36% drop could potentially trigger a liquidation.
On Frax Finance, Egorov has 59 million CRV backing a debt of 15.8 million Frax. While the amount is lower, Fraxlend's time-weighted variable interest rate makes the loan more risky. The loan is currently at 100% utilization, and because of this, the interest rate for the loan doubles every 12 hours. While the interest rate is only 81.2%, Delphi Digital said that it can go up to 10,000% in just 3.5 days. This can lead to liquidation regardless of the price of the CRV token.
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