Curve DAO’s governance token CRV recently experienced a 12% drop after it was revealed that its founder, Michael Egorov, took risky loans on Aave. The token reached its lowest trading level against ether at 0.00035010 ETH on June 15. Egorov deposited approximately 431 million CRV (valued at roughly $246 million) across multiple decentralized lending platforms and borrowed $101.5 million of stablecoins on various platforms. This accounts for 50.5% of CRV’s circulating supply.
A liquidation threat of $107 million looms over CRV on Aave if its value falls below $0.37. In such a scenario, the CRV tokens would be locked in Aave’s smart contracts until a buyer settles and liquidates the collateral. A proposal has been made to freeze Egorov’s loans on Aave and prevent further CRV loans to avoid catastrophe.
The negative bets on CRV have significantly increased, providing fuel for a potential quick upside move. CRV’s open interest volume for perpetual swap contracts increased from $35.5 million to $46.3 million following the disclosure of Egorov’s loans. The negative funding rate suggests that most of the new traders are betting on additional price downside, which in turn creates an opportunity for buyers to hunt their stop losses.
Technically, the CRV/USD pair could find support around the 2022 low between $0.53 and $0.40. A speedy recovery is possible due to a short-squeeze, with the price potentially touching the 50-day moving average at $0.82. On the downside, a breakdown of this support level could extend the sell-off towards the 2021 low near $0.32.
The CRV/ETH pair follows a descending pattern, hinting at the likelihood of a rebound from the 0.0032 ETH level. However, the long-term trend remains negative, especially with the ETH market’s bearish structure below the 0.0042 ETH support level from 2022 lows.
Curve’s revenue stats do not favor buyers either. The platform’s fees have significantly declined after the FTX collapse in 2022, reducing CRV’s yield over time. While Curve experienced a temporary increase in activity in 2023, the fees have remained at near two-year lows in recent months. Additionally, earnings through bribes for directing rewards to specific pools have remained near one-year lows.
Source: Cointelegraph
