Lending Protocols Are Strategizing Round The Elevated Uncertainty Of Loans Backed By CRV Following A Multimillion Greenback Curve Exploit
Curve founder Michael Egorov has tens of millions in crypto loans throughout numerous DeFi lending protocols, largely collateralized with CRV tokens.
Curve’s current high-profile exploit triggered CRV to quickly drop over 20%. The token has since stabilized over the previous few days of buying and selling after outstanding crypto buyers converged to support the project.
Transaction information present Egorov shuffling belongings to take care of numerous positions throughout crypto lending platforms together with Aave, Abracadabra and Fraxlend.
Since an extra precipitous drop within the token has the potential to place Egorov’s giant CRV-backed loans vulnerable to liquidation, lending protocols are contemplating methods to cut back the outsized dangers posed by these positions.
Aave Mulls Choices
Of lending protocols uncovered to CRV-related threat, Aave stands out with $49M borrowed towards $151M in CRV.
Chaos Labs really helpful a measured method to de-risking CRV with loan-to-value (LTV) reductions in keeping with a method proposed in June, the latest execution of which was thwarted within the chaos brought on by the CRV exploit. The group really helpful that CRV borrowing be disabled on the Ethereum and Polygon Aave V3 deployments to cut back worth impacts from quick positions and extra borrowing towards CRV.
Notably, Chaos Labs questioned the efficacy of a proposal by Gauntlet to set TVL to 0 on CRV-related positions to impede borrowing “provided that it may be circumvented in V2.”
Chaos Labs objected to Gauntlet’s proposed freeze of CRV, stating, “we don’t view a freeze of the CRV market as a productive measure given the present circumstances.”
Marc Zeller, Aave’s integrations lead, has floated one other proposal that will use funds from the Aave DAO treasury to amass CRV tokens in an effort “to help the DeFi ecosystem and place Aave DAO strategically within the Curve wars, benefiting GHO secondary liquidity.”
Excessive Curiosity on FraxLend
Egorov’s excellent mortgage of $9.2M on FraxLend, backed by simply over $22.6M price of CRV, could also be of explicit concern as rates of interest on the protocol mechanically improve enormously as liquidity dries up.
Egorov was in a position to stimulate liquidity on FraxLend and forestall a big rise in charges utilizing a novel method – Curve’s newest crvUSD/fFRAX pool, which affords 100,000 CRV in incentives.
Abracadabra Eyes CRV Liquidity
A vote is now energetic on Snapshot to find out whether or not the Abracadabra lending platform will apply collateral-based curiosity to CRV cauldrons on the protocol. All proceeds will probably be directed to its treasury to mitigate DAO threat associated to CRV liquidity situations.
The proposal takes into consideration repayments made on MIM loans backed by CRV and the expressed need by each the Convex and Curve communities to “execute a coordinated effort in bringing extra CRV liquidity on-chain.”
Thus far, voters have overwhelmingly supported AIP 13.6, with almost 100% of votes forged in favor.