Michael Egorov, the founder of the decentralized finance protocol Curve (CRV), recently faced the risk of liquidation on his massive DeFi loan as the overall crypto market experienced a significant downturn over the weekend. The price of Bitcoin dropped by 10%, while altcoins like CRV suffered even larger losses, declining by 30% from $0.58 to $0.43. At one point, CRV fell to $0.38, dangerously close to Egorov’s liquidation point of $0.37. The lending health rate for his positions dropped to 1.1, indicating the potential for liquidation if CRV’s price continued to decline.
Egorov had mortgaged a total of 371 million CRV tokens, valued at approximately $156 million, across 5 addresses on 6 lending platforms in order to borrow $92.54 million in stablecoins. In order to avoid being liquidated, Egorov needed to either increase his collateral base by adding more CRV tokens or repay some of his debt. To protect his position in the past, Egorov had relied on the support of other crypto industry heavyweights. For example, Tron founder Justin Sun had purchased 5 million CRV tokens from Egorov at $0.40 each in October, and Egorov had raised an additional $15.8 million through over-the-counter deals, at the cost of 39.2 million CRV tokens.
The use of over-the-counter sales allowed Egorov to raise funds without causing significant market disruption due to his large holdings of CRV tokens. This approach is common among whales who may struggle with liquidity issues when dealing with altcoins. CRV’s low trading volume and market cap emphasize the potential impact of Egorov’s liquidation on the token’s price, as it could trigger a significant price decline. This risk underscores Egorov’s and others’ concerns about protecting his loan and avoiding liquidation, which could have far-reaching consequences for the token’s value.
Egorov’s situation was not unique during the weekend’s market downturn, as crypto traders collectively experienced over $1.5 billion in liquidations between April 13 and 14. Even short traders looking to profit from market volatility suffered losses, with $273 million in liquidations reported. Decentralized exchanges also saw significant liquidations, totaling $120 million during that time period. These events highlight the inherent risks associated with trading and borrowing in the volatile and fast-paced crypto market, where sudden price fluctuations can lead to significant losses for market participants.
The potential liquidation of Egorov’s positions and the broader trend of liquidations across the crypto market serve as reminders of the importance of risk management and security measures when engaging in DeFi activities. The interconnected nature of the crypto market means that individual actions, such as Egorov’s borrowing and lending activities, can have cascading effects on token prices and market stability. As the market continues to evolve and grow, participants must remain vigilant and proactive in managing their exposures to avoid facing the consequences of unexpected downturns and liquidations.
