As the CRV crisis unfolds, what are the main dangers Curve is currently facing?

Square-Creators-000000001442 · 2023-08-01T09:56:50.000Z

Curve's ongoing crisis Affected by security incidents and potential liquidation risks, CRV prices continued to fall today, reaching as low as $0.482. Although it has rebounded to $0.58 as of the time of writing, the 24-hour drop is still 8.13%. At the same time, the governance tokens of major Curve ecological projects also suffered heavy losses, with Convex (CVX) falling as low as $2.884 and now temporarily trading at $3.034, a 24-hour drop of 11%. Due to the potential threat of liquidation of bad debts, multiple lending projects such as Aave and Frax are also falling simultaneously. AAVE is temporarily reported at US$64.61, a 24-hour drop of 8.87%; FXS is temporarily reported at US$5.69, a 24-hour drop of 5.03%.

Curve's crisis is still brewing. Affected by security incidents and potential liquidation risks, the price of CRV continued to fall today, reaching a low of $0.482. Although it has rebounded to $0.58 as of writing, the 24-hour decline is still 8.13%.
At the same time, the governance tokens of major Curve ecosystem projects also suffered a heavy blow. Convex (CVX) fell to a low of $2.884 and is currently trading at $3.034, a 24-hour drop of 11%.
Due to the potential threat of liquidation of bad debts, multiple lending projects such as Aave and Frax are also falling simultaneously. AAVE is currently trading at US$64.61, down 8.87% in 24 hours; FXS is currently trading at US$5.69, down 5.03% in 24 hours.
The impact of continued spread has even caused the entire DeFi sector to turn pessimistic. What is the main danger facing Curve now? Although only one day has passed, Curve’s current main source of crisis has changed.
If the main risk Curve faced yesterday came from the contract security threat caused by the Vyper vulnerability, then the main risk today comes from the potential liquidation threat of CRV's debt positions on major lending platforms, among which the health of Curve founder Michael Egorov's personal debt position is crucial.
It should be made clear that these two threats are not the same thing in essence. Even without the Vyper vulnerability, if the market continues to fall, the risk of Egorov's debt liquidation will be exposed sooner or later. It's just that this time Vyper served as a fuse to bring this "hidden mine" to the table.
On-chain data shows that as of this afternoon, Egorov has pledged a total of approximately 450 million CRV on Aave, Fraxlend, Abracadabr, and Inverse, and has borrowed approximately US$105 million in funds. The overall liquidation price of this debt position is approximately US$0.38 to US$0.4.
Since 450 million CRVs account for a full half of the token’s circulating supply, if these debt positions are liquidated, a huge amount of CRV selling pressure will be directly thrown into the market in a short period of time, which is bound to cause a heavy blow to the already shaky CRV price.
Egorov has been trying to avoid potential liquidation through various operations, such as replenishing CRV collateral, repaying part of the debt in succession, or borrowing Curve to indirectly influence the interest rate of the debt position. However, Egorov's personal debt positions are scattered across multiple lending platforms, and the scale and risk status of each debt position are different. It is uncertain whether his operations can completely avoid the risk of liquidation.