Over the past 24 hours, Curve DAO (CRV) has been buried in a tsunami of doubt, uncertainty, and fear (FUD). The founder, Michael Egorov’s large borrowing position and the consequent liquidation of majority of these positions cause the unrest.
Arham Intelligence claims that liquidation of CRV tokens at a startling $140 million is imminent. Egorov borrowed roughly $95.7 million in stablecoins, using $141 million in CRV across five separate platforms, therefore sparking the crisis.
Curve DAO Faces Liquidation Risk
Of this financing, $50 million came from a platform charging outrageous 120% annual percentage yield (APY). The near-absence of crvUSD accessible for borrowing against CRV on the platform accounts for the high APY, therefore aggravating the matter.
The main risk resides in the possible devaluation of Curve Dao, which would cause these holdings to be liquidated. This risk occurred as CRV’s price dropped lately, causing forced liquidations that have accelerated the down spiral. From about $0.36 to almost $0.27, CRV’s price has dropped more than 23% over the previous 48 hours.
Based on a thorough daily price trend study of CRV, additional liquidations most certainly by the end of the day. With a clear example of the volatility of the token, Curve Dao suffered consecutive drops on June 10 and 11, totalling over 16%.
Over those two days, the price dropped from around $0.41 to almost $0.35. A little 2.74% increase on June 11th pushed the price to about $0.36, providing a little relief and a false promise for recovery.
Panic among investors has been sparked by the most notable single-day drop in price CRV has seen in more than a year. This anxiety has caused a major migration of CRV coins to exchanges, therefore aggravating the pressure on the price of the token.
Data from CryptoQuant shows that during the past 24 hours, CRV’s exchange reserves have surged significantly; reserves now reach an all-time high of over 627 million tokens. This surge shows a general movement by holders to dump their CRV holdings, a tendency that might lower prices even further.
