Michael Egorov, the founder of the decentralized finance protocol Curve (CRV), faced the risk of liquidation on his massive DeFi loan as the cryptocurrency market experienced a sharp decline over the weekend. The price of Bitcoin dropped by 10% since Saturday, with altcoins like CRV facing even steeper declines of 30%, falling from $0.58 to $0.43. At its lowest point on Saturday, CRV fell to $0.38, nearing Egorov’s liquidation point of $0.37. To protect himself from liquidation, Egorov would need to either increase his collateral base with more CRV or repay some of his debt.
Egorov had mortgaged a total of 371 million CRV tokens (approximately $156 million) across five addresses on six different DeFi lending platforms to borrow $92.54 million in stablecoins. The health rate of his positions had dropped to around 1.1, indicating the risk of liquidation if the CRV price continued to decline by 10% without any margin call or repayment. In the past, Egorov had sought assistance from Justin Sun, the founder of Tron, who purchased 5 million CRV tokens from Egorov at $0.40 each. Additionally, Egorov engaged in over-the-counter deals to raise $15.8 million by selling 39.2 million CRV tokens.
Over-the-counter sales were particularly beneficial for Egorov to avoid slippage or market impact when dealing with altcoins like CRV, which have limited liquidity. CRV, with a trading volume of $85 million in the past 24 hours and a market cap just above $500 million, was susceptible to drastic price movements if Egorov’s loan was liquidated. The fear was that a liquidation event could cause the CRV token price to plummet to unprecedented lows, prompting Egorov and other stakeholders to take measures to protect his loan and collateral.
The cryptocurrency market at large experienced significant liquidations during the time period. Data from Coinglass indicated that traders lost over $1.5 billion in liquidations between April 13 and 14, with short traders losing $273 million during periods of heightened volatility. Decentralized exchanges also saw $120 million in liquidations, emphasizing the widespread impact of the market downturn on various sectors within the crypto space. The risk of liquidation was a common concern for borrowers and traders, highlighting the importance of managing one’s positions effectively to avoid potential losses.
The volatility and sharp price movements in the cryptocurrency market underscored the challenges faced by individuals like Michael Egorov, who relied on DeFi loans to leverage their positions. The need to manage collateral, repay debts, and navigate market fluctuations became critical for borrowers and traders alike to mitigate the risk of liquidation and financial losses. Egorov’s situation served as a reminder of the inherent risks associated with borrowing and trading in the crypto space, prompting stakeholders to adopt risk management strategies and protective measures to safeguard their assets and positions during turbulent market conditions.
