- CRV token’s ongoing crisis could jeopardize the DeFi ecosystem as Curve is used as a trading pair and ballast across pools.
- Risk management firm Gauntlet proposes that AAVE pause CRV borrowing, while the CRV founder attempts to shore up liquidity for the token.
- CRV price falls dramatically from $0.742 on July 30 to Tuesday’s low of $0.485.
Curve Finance’s CRV token is currently suffering a liquidity crisis, from the exploit on July 30. The stablecoin-focused DEX relies on smart contracts to offer borrowing, trading and lending services to users.
Over $100 million in DeFi tokens is at risk, due to stablecoin pools, used for pricing and liquidity across the ecosystem. Hackers drained several stablecoin pools on the platform and the CRV token is now faced with a massive liquidity crisis.
Curve Finance founder, Michael Egorov, has been shoring up liquidity for CRV, but the entire DeFi ecosystem is at risk. A risk management firm, Gauntlet, recently stepped up to tackle the situation and proposed that AAVE halts borrowing against CRV as collateral. The community is set to vote until August 5 and come up with a solution to the problem plaguing DeFi.
Also read: DeFi blue chips MKR , COMP are outliers in Bitcoin season, rally driven by fundamentals
AAVE community debates on proposal to block CRV token borrowing
Gauntlet argues that the ongoing crisis in Curve stems from usage of the token as collateral and it can be prevented by pausing all borrowing activity. The firm proposed this on AAVE and voting on the proposal ends on August 5. At the time of writing, the community is debating whether the proposal helps AAVE protect against the spreading liquidity crisis.
PennBlockchain, an undergraduate and graduate/MBA organization for blockchain and crypto-curious students at the University of Pennsylvania, supports Gauntlet’s proposal of setting CRV Loan-to-Value (LTV) ratio to 0 to avoid further borrowing.
The community sided with users worried about the potential of bad debt to the AAVE protocol caused by CRV-collateralized borrowing. The de-risking suggestion of Gauntlet is garnering support from the community of users and the proposal could soon be put to vote.
Egorov currently has 267,432,866 CRV collateral and 54 million USDC debt on Aave V2. Voting on the proposal is a risk response to michwill (Egorov’s) positions, attempting to fight the risk of bad debt on AAVE.
CRV price is $0.569 at the time of writing, recovering from its drop to $0.485 on Tuesday.
Like this article? Help us with some feedback by answering this survey:
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Bitcoin Weekly Forecast: BTC nosedives below $95,000 as spot ETFs record highest daily outflow since launch
Bitcoin price continues to edge down, trading below $95,000 on Friday after declining more than 9% this week. Bitcoin US spot ETFs recorded the highest single-day outflow on Thursday since their launch in January.
Bitcoin crashes to $96,000, altcoins bleed: Top trades for sidelined buyers
Bitcoin (BTC) slipped under the $100,000 milestone and touched the $96,000 level briefly on Friday, a sharp decline that has also hit hard prices of other altcoins and particularly meme coins.
Solana Price Forecast: SOL’s technical outlook and on-chain metrics hint at a double-digit correction
Solana (SOL) price trades in red below $194 on Friday after declining more than 13% this week. The recent downturn has led to $38 million in total liquidations, with over $33 million coming from long positions.
SEC approves Hashdex and Franklin Templeton's combined Bitcoin and Ethereum crypto index ETFs
The SEC approved Hashdex's proposal for a crypto index ETF. The ETF currently features Bitcoin and Ethereum, with possible additions in the future. The agency also approved Franklin Templeton's amendment to its Cboe BZX for a crypto index ETF.
Bitcoin: 2025 outlook brightens on expectations of US pro-crypto policy
Bitcoin (BTC) price has surged more than 140% in 2024, reaching the $100K milestone in early December. The rally was driven by the launch of Bitcoin Spot Exchange Traded Funds (ETFs) in January and the reduced supply following the fourth halving event in April.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.