In the fast-paced world of cryptocurrencies, volatility is not uncommon. However, recent developments surrounding Curve founder Michael Egorov have sent shockwaves through the market. Egorov is currently facing significant liquidation risks, with substantial loans backed by a substantial portion of $CRV, the native cryptocurrency of the Curve Finance platform.
As of the latest available data, Michael Egorov’s loans are backed by a staggering 427.5 million $CRV, representing about 47% of the entire circulating supply. These loans, valued at approximately $100 million, have become a focal point of concern for investors and market participants.
The Risky USDT Loan
On a specific date, Egorov had a $305 million loan backed by 63.2 million USDT (Tether). With a liquidation threshold set at 55%, the position would be eligible for liquidation at a price of 0.3767 $CRV/USDT. Such a scenario would require a mere 33% drop in the price of $CRV, which, given the market’s volatility, is not beyond the realm of possibility. Additionally, Egorov is paying an annual percentage yield (APY) of approximately 4% for this particular loan.
In addition to his USDT loan, Egorov also holds 59 million $CRV, which he has supplied against a 15.8 million FRAX debt. While the CRV collateral and stablecoin debt are relatively smaller in comparison to his other position, this particular scenario poses a more significant risk to $CRV due to Fraxlend’s Time-Weighted Variable Interest Rate.
Interest Rate Volatility:
Currently operating at 100% utilization, Fraxlend’s interest rate doubles every 12 hours. The current interest rate stands at 81.20% but could surge to nearly 10,000% APY after just 3.5 days if utilization remains unchanged. Such exponential interest rate growth can lead to liquidity issues and, in the worst-case scenario, trigger a cascading effect on the entire cryptocurrency market.
Impact on Curve and the Cryptocurrency Marke
Michael Egorov’s substantial loans and the associated liquidation risks have heightened concerns about the stability of Curve and the broader cryptocurrency market. The possibility of large liquidations due to volatile market conditions could create a ripple effect across the industry.
