Michael Egorov's collateralized loan triggers massive liquidation as CRV price drops 24%, highlighting DeFi risks and volatility.
In a significant financial event, Michael Egorov, the founder of Curve Finance, faced a massive liquidation of $140 million worth of Curve's native token, CRV. This occurred after he borrowed nearly $96 million in stablecoins against his CRV collateral. The liquidation was triggered by a sharp decline in the price of CRV, which fell by 24% between June 12th and 13th, 2023.
Curve Finance is a decentralized finance (DeFi) protocol that allows users to trade stablecoins with low fees and slippage. Michael Egorov, the founder, has been a prominent figure in the DeFi space. However, this is not the first time Egorov has faced financial challenges. In August 2023, he sold 72 million CRV tokens to repay debts after a hack threatened his positions.
The recent liquidation occurred as the price of CRV dropped significantly, causing Egorov's collateral to lose value. He had used $141 million worth of CRV tokens to secure a $95.7 million stablecoin loan. As the price of CRV plunged by as much as 30%, it triggered the liquidation of his entire position across five different protocols.
Despite the massive liquidation, Egorov managed to cover over $1 million in bad debt to Llamalend by selling 30 million CRV tokens. This move helped mitigate some of the financial damage, but it highlights the volatility and risks associated with using crypto assets as collateral.
This event serves as a stark reminder of the risks involved in the DeFi space, especially when using volatile assets as collateral. It underscores the importance of risk management and the need for robust strategies to handle sudden market fluctuations. For investors and users of DeFi platforms, understanding these risks and having contingency plans in place is crucial.
