In a bold maneuver, crypto market makers at Binance intervened to shore up the faltering native token CRV of Curve, a decentralized exchange. An exploit in the system late Sunday sent the cryptocurrency into freefall. This threatened a significant liquidation of CRV-backed loans and potential market-wide ramifications. The intervention effectively meant that the collection of buy orders within 2% of the mid-price saw an increase from about 500,000 CRV to over 1 million CRV, indicating a possible doubling of the market’s capacity to accommodate sizeable orders at stable prices, as per findings by Paris-based crypto data provider Kaiko.
Though the sudden surge in bid depth was an unexpected turn of events, many viewed it as an offer of robust support to the faltering cryptocurrency. Clara Medalie, the director of research at Kaiko, explained this as a peculiar deviation from the norm. She stated that market makers are likely to retract orders to shield themselves from unfavourable price fluctuations, which causes liquidity to vanish during significant market upheavals. However, in this case, liquidity was being added to the CRV order books, specifically to the bid side.
Despite this support, the exploit led to a steep tug on Curve’s CRV which fell by more than 14% to 58 cents. This fueled worries of a possible liquidation of Michael Egorov, Curve’s founder’s, considerable worth of USDT and FRAX borrowings that were backed by CRV, spurring further CRV sales. The descending spiral of CRV prices threatened to reach Egorov’s liquidation threshold of 37 cents. Such a chain reaction could have had a staggering impact on the broader decentralized finance market.
However, at this stage, such an eventuality seems to have been kept at bay. There are obviously strong reasons for preventing the CRV price from dropping below a certain critical level. As for the liquidity across other platforms, Medalie noted that despite the doubling of bid depth on Binance, CRV’s overall liquidity did not witness a significant alteration. This theory also found resonance with FalconX Research’s viewpoint.
Source: Coindesk
