As geopolitical tensions sent crypto markets into a tailspin last weekend, the Curve Finance community was again forced to consider the risks posed by founder Michael Egorov.
Egorov came close to liquidation on his highly leveraged CRV positions, which total over $150 million, with CRV dipping below $0.38 on Saturday, according to data from CoinMarketCap.
On-chain analyst EmberCN identifies five addresses that have current open positions of $93 million worth of stablecoins borrowed against 372 million CRV (worth $162 million at time of writing).
It was also noted that the 20 million CRV position on Silo did briefly fall below its liquidation threshold, however, no liquidator took the opportunity to seize the collateral.
Egorov’s response, in a nod to the oft-repeated theory that he never plans to repay his loans after having bought two Melbourne mansions, was to launch a new pool on Curve with the aim of evening-out interest rates on three crvUSD lending pools.
Read more: Curve Finance ‘gentleman’s agreement’ expires, counterparties dump CRV
The Egorov saga is a sword of Damocles over the Curve community
If positions are allowed to hit their liquidation thresholds, the CRV collateral would begin to be sold off by liquidation bots. These sales would cause a further drop in the CRV price, with more liquidations to follow; a situation known as a liquidation cascade.
Such an event would be disastrous for individual Curve holders and the many projects involved in the so-called ‘Curve Wars’ — the label given to protocols that aim to accumulate mass amounts of CRV in order to gain voting power on Curve.
Egorov’s positions have been in danger several times in the past, most notably after the hack of Curve itself. The last time he came close to liquidation, the fallout sent the price of CRV down quickly, and, in a bid to pay down his debts, Egorov sold a total of almost 40 million CRV at $0.40 each.
The over-the-counter (OTC) deals were made with an understanding that the tokens wouldn’t be sold for six months.
In early February, the handshake arrangement between the bailout providers expired, with some 8.75 million CRV seemingly dumped immediately, for around 17% profit.