TL;DR
- Curve Finance’s Resilience: Despite successfully thwarting a hacking attempt, Curve Finance’s native token, CRV, experienced a 20% drop in value, with further stress due to a $20 million hack of the UwU lending protocol.
- Michael Egorov’s Liquidation: The price decline of CRV triggered the liquidation of over 111 million CRV tokens held as collateral by Curve Finance founder Michael Egorov, contributing to a domino effect of liquidations within the DeFi space.
- DeFi Market Impact: CRV’s value plummeted by 33% on June 12, marking a 98% decrease from its August 2020 peak, affecting other DeFi tokens and highlighting the volatility and interconnectedness of the DeFi ecosystem.
The decentralized finance (DeFi) community witnessed Curve Finance’s resilience against a hacking attempt, only to see its native token, CRV, suffer a staggering 20% drop in value.
Was not planned, but fascinating how soft liquidations work on https://t.co/bdUCarOsuM. There are docs at https://t.co/zQjPsRK8lQ (same as for crvUSD).
The system showed a fantastic performance. This gave time for liquidators to prepare funds and OTC-liquidate the hacker's… https://t.co/4nG8BIEush
— Michael Egorov (@newmichwill) June 12, 2024
Michael Egorov, the founder of Curve Finance, faced a significant setback as his substantial collateral of over 111 million CRV tokens began liquidation proceedings. This was triggered by a sharp decline in CRV’s price, which also led to a domino effect of liquidations across the board.
Curve Finance Woes
CRV has experienced a rollercoaster ride over the past week, with its worth plummeting by a staggering 45% since June 7. This devaluation has put tremendous strain on individuals like Egorov, who have been using the token as collateral. As of now, CRV is being traded at $0.281, marking a significant drop of almost 25% in the past 24 hours.
Adding to the platform’s challenges was the recent $20 million hack of the UwU lending protocol. In response, Egorov praised the effectiveness of Curve’s ‘soft liquidations,’ a feature of the Lending-Liquidating Automate Market Maker Algorithm (LLAMMA), which he claimed allowed for orderly liquidations and prevented the system from incurring bad debts.
DeFi Fallout
On June 12, the aftermath of these incidents hit hard as CRV’s value dropped by a staggering 33% within minutes, causing the token to be valued at only $0.283. This marks a significant 98% decline from its peak of $15.37 in August 2020.
The fallout extended beyond Curve, with other DeFi tokens like GMX and Frax Share (FXS) also experiencing losses, albeit to a lesser extent.
The broader crypto market remained stagnant, with a total capitalization of $2.58 trillion. Major cryptocurrencies such as Bitcoin and Ethereum showed little movement, still reeling from their earlier declines in the week.
The DeFi sector braces for potential aftershocks as industry experts had previously cautioned about the risks associated with large debt positions like Egorov’s. The situation serves as a stark reminder of the volatility and interconnectedness of the DeFi ecosystem.
