Michael Egorov, the founder of Curve Finance, is undergoing massive liquidations after the token price plummeted. Egorov had over 111 million CRV tokens as collateral and $20 million in debt across four DeFi platforms, as reported by Lookonchain on June 13. The sharp fall in CRV's value triggered a cascade of liquidations, affecting Egorov's positions.

Curve Finance Under Pressure

CRV prices have been declining steadily over the past week, plunging 45% since June 7. This dramatic drop has exerted immense pressure on those using CRV as collateral for DeFi loans, including Egorov. The situation worsened following a $20 million hack of the UwU lending protocol earlier in the week, further destabilizing the platform and its token.

Despite the turmoil, Egorov attempted to reassure the community by highlighting the performance of Curve’s soft liquidations, a component of the platform’s Lending-Liquidating Automated Market Maker Algorithm (LLAMMA). “The system showed a fantastic performance,” Egorov stated, adding that it allowed liquidators to prepare funds and OTC-liquidate the hacker’s position, ensuring the system had no hacker’s funds left and no bad debts.

Massive Debt and Liquidation Risk

As of June 12, Egorov was borrowing approximately $96 million in stablecoins, predominantly Curve’s crvUSD, against $141 million in CRV across five accounts on five different protocols, according to blockchain intelligence firm Arkham. With current rates, Egorov faces an annualized cost of $60 million to maintain his positions.

Industry experts had previously cautioned about the potential consequences of such a large debt position. Trader 'MisterSpread' commented on X, “This has ramifications throughout the whole DeFi sector, unfortunately, so expect some pullbacks.” Furthermore, Crypto Quant founder Ki Young Ju noted that CRV balances on exchanges hit an all-time high, rising 57% in just two hours on June 13.

DeFi Market Impact

The fallout from CRV's price crash has been swift and severe. CRV prices dropped 33% in minutes during late trading on June 12, currently trading at $0.283, down from an intraday high of $0.374. This marks a staggering 98% decline from its all-time high of $15.37 in August 2020.

Other DeFi tokens, such as GMX and Frax Share (FXS), are also experiencing losses, though not as severe as CRV. The overall market remains flat, with the total market cap standing at $2.58 trillion and minimal movement from major cryptocurrencies Bitcoin and Ethereum following their declines earlier in the week.

Conclusion

The liquidation of Curve Finance's founder amid a significant CRV token price crash highlights the vulnerabilities within the DeFi ecosystem. As the situation unfolds, industry observers will be closely watching the potential ripple effects across the broader DeFi market.