Original author: Crypto research institute Delphi Digital

Original translation: Leo, Bob, BlockBeats

Michael Egorov, founder of Curve Finance, has always been a familiar "lending and cashing" tycoon. Egorov also often conducts CRV mortgage and stablecoin lending on Aave and Frax. However, due to the recent drop in CRV prices and the use of its pool, the price of CRV has plummeted. As of the time of writing, the price of CRV is about $0.5, a 24-hour drop of more than 20%, resulting in a surge in the risk of Egorov's CRV mortgaged loans being liquidated. Delphi Digital wrote an article about "The impact of the forced liquidation price of the Curve founder's loans and the plunge in CRV on the entire DeFi field", which BlockBeats compiled as follows:

Several Curve Finance pools were exploited yesterday, and Curve founder Michael Egorov currently has a loan of approximately $100 million secured by $427.5 million in CRV (approximately 47% of the entire CRV circulating supply). With CRV down 10% in the past 24 hours, Curve’s health is in jeopardy.

On lending protocol Aave, Egorov has a $63.2 million USDT loan backed by $305 million in CRV.

At a 55% liquidation criterion, his position would be liquidated when CRV reaches a price of 0.3767 USDT.

At the current CRV price, the liquidation standard only requires a CRV price drop of about 33%. In addition, Egorov also paid an APY of 4% per year for the loan.

On Frax Finance, Egorov currently has 59 million CRV, corresponding to $15.8 million in FRAX loans.

While this is much less than both his CRV collateralization and stablecoin lending on Aave, CRV still carries a lot of risk due to Fraxlend’s time-weighted variable interest rate.

At the current 100% utilization rate, the interest rate will double every 12 hours.

The current rate is 81.20%, but the APY is expected to top out at nearly 10,000% in 3.5 days.

This exponential rate could lead to his eventual liquidation regardless of CRV price movements. At the highest LTV of 75%, his position would be liquidated at $0.517 (CRV) in 4.5 days, a 10% drop from the current CRV price.

Egorov has attempted to reduce his debt and utilization twice, repaying a total of 4 million FRAX (3.5 m, 500 k) in the past 24 hours. However, market utilization remains at 100% and users have withdrawn liquidity soon after his repayment.

Given the low liquidity that exists, these large risk positions pose a serious concern for the CRV price.

There is currently about $10 million of CRV liquidity on-chain, and a sell order with a depth of -2% at $370,000 on Binance.

The size of these risk positions can reach eight figures.

As a result, there is a risk that the CRV price could plummet to extremely low levels, triggering a chain reaction across much of the DeFi ecosystem.

Today, Curve founder Michael Egorov deployed a new Curve pool and threshold: a 2-pool consisting of crvUSD and Fraxlend’s CRV/FRAX LP tokens, into which he injected $100,000 in CRV incentives.

This CRV/FRAX LP token is the same liquidity he borrowed on Fraxlend and is his biggest risk from a potential liquidation.

This is an attempt to incentivize liquidity into the lending market to reduce utilization and reduce the risk of debt getting out of control.

Within 4 hours of launch, the pool had attracted $2 million in liquidity and reduced utilization to 89%.

We will be actively monitoring the situation in this thread, please be sure to bookmark it.

Delphi members can get the latest information via the latest Alpha Feed post by Eason Wu, which can be found here.

Larry 0x has also put together some charts we wanted to share.

Note: These charts assume that positions do not change (no collateral added or debt paid down), the CRV price does not change, and utilization remains at 100% at all times.

Interest Rate vs. Time (Hours)

Debt ($M) vs. Time (Hours)

Health Factor vs. Time (Hours)

Liquidation Price (USD) vs. Time (Hours)

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