Curve Founder's $CRV Loan
$131M worth of $CRV is at risk of liquidation if the price drops by 35%. Curve’s Founder has borrowed $110M in stablecoins against all his $CRV (50% of circulating supply).
This could have severe implications for DeFi, with lending protocols at risk of accruing bad debt.
Given these risks, new deposits and loans have been paused on Aave V2. This action, along with an active governance proposal to freeze $CRV assets on Aave V2, aim to limit further risk exposure and mitigate potential damages due to market liquidity concerns.
The current buy-side liquidity across ETH and stablecoins is only $51M, just 42% of the liquidatable amount on Aave and FraxLend combined.
If liquidation occurs, there isn't enough on-chain liquidity to market sell Egorov's position without drastically affecting $CRV prices, which would likely lead to bad debt across lending protocols, including Aave, Frax, and Abracadabra.
Additionally, there is a structural imbalance towards the sell side. On a daily basis, 530k $CRV tokens, or 0.06% of the circulating supply, are distributed to investors and as staking rewards to LPs. This could contribute to volatility and further price pressures on $CRV.
6/ Despite the ongoing FUD around $CRV, Egorov has stated he removed everything from Aave v3, preventing people from borrowing $CRV and selling it, which would further intensify the sell pressure and risk of triggering liquidations.