Partnered With:

Founder of Curve reveals his strategy on Aave: "Cash out" or "hold on"?

Read this article in 8 Minutes

Source: Frank, Foresight News

On-chain data shows that due to the recent drop in CRV prices, Curve founder Michael Egorov deposited 38 million CRV (worth $24.5 million) into Aave yesterday to reduce his own liquidation risk.

This article from Foresight News will briefly introduce how much CRV the founder of Curve has currently mortgaged in Aave, how much money he has borrowed, where he has spent it, and what impact it may have on the future market.

How much money did they borrow from Aave?

DeBank data shows that as of the time of writing, Curve founder Michael Egorov has deposited over $1.8 billion in assets into Aave V2, mainly consisting of 277 million CRV tokens (approximately $178 million).

And he has borrowed 64.23 million USDT from Aave V2, and the health factor of the address on Aave V2 is currently 1.68.

Additionally, he also deposited over 14.1 million CRV (approximately 9.09 million USD) into Aave V3 and lent out approximately 2.78 million USDT and 743,000 USDC.

The current health factor of the address in Aave v2 is 1.68.

As of now, the founder of Curve has deposited 291 million CRV (187 million USD) into Aave and borrowed approximately 67.75 million USD worth of stablecoins.

Where did the borrowed money go?

According to Lookonchain's data monitoring, the funds borrowed by Curve founder Michael Egorov through Aave in history are mainly divided into three directions:

3770 million USDT deposited into Bitfinex;

5100 million USDC has been transferred to Wintermute Trading;

1420 USDT were used to purchase ETH and USDC during the USDC decoupling period;

Firstly, he deposited a total of 37.7 million USDT into Bitfinex, of which 31 million USDT was transferred between April 10th and April 14th. During this period, the price of Bitcoin rose from $28,000 to over $30,000. If held until now, it would still be in a loss-making state.

From June to September 2021, he also transferred 4.74 million USDT to the address starting with "0xb10f", mainly for providing liquidity to Curve, and deposited a total of 4 million USDT on Kraken.

Since May 17th of this year, he has transferred a total of 51 million USDC to Wintermute Trading through an address starting with "0x9660".

In addition, during the USDC anchor period in March of this year, he borrowed 6.8 million USDT to purchase 4014 ETH at a price of $1694, and borrowed 7.4 million USDT to purchase 7.8 million USDC at a price of $0.95, which appears to be a clear profit at present.

"Cash out" or "Hold on to sell"?

CoinGecko data shows that the current circulating supply of CRV is 852 million, which means that Michael Egorov's 291 million CRV used as collateral in Aave accounts for 34.15% of the circulating supply of CRV!

For Michael Egorov, holding over one-third of the circulating CRV supply, he did not directly sell for profit, but instead used collateral in lending agreements to obtain funds, avoiding direct selling pressure on the secondary market, which seems to be a "reluctant sale" choice.

However, from another perspective, it is difficult to smoothly sell such a large volume of CRV in the secondary market, and Aave's collateralized lending provides an option to liquidate with minimal impact.

This also leads to the current 291 million CRV used as collateral, like a hidden dam, posing a great threat to the Curve ecosystem and Aave protocol. It should be noted that the long and short battle of CRV in November last year ultimately resulted in about $1.6 million in bad debts for Aave.

Therefore, if the market continues to decline and liquidity remains tight, once the CRV price falls to the liquidation point, it is very likely to cause a chain reaction.

There may even be someone targeting this large clearing point for precise ambush (although since the CRV long and short battle, Aave has banned users from borrowing CRV, which to some extent reduces the risk of CRV being shorted), as Yang Mindao, the founder of dForce, said in a tweet:

"Aave V2 has no deposit limit, which leads to the inability to control the exposure of collateral. The only thing that can be done is to increase the borrowing cost of USDT. Mortgaging one's own currency for leverage may seem like a reluctance to sell, but in reality, it is a form of enticing short selling."

It is worth noting that Michael Egorov, the founder of Curve, has recently been in a period of controversy in public opinion.

- On May 28th, it was reported by the media that he and his wife Anna Egorova purchased two luxury homes in Melbourne for a total of $41 million, covering an area of 4251 square meters.

- On September 9th of this month, ParaFi Capital, Framework Ventures, and 1kx, three VC firms, sued Curve founder Michael Egorov for alleged involvement in fraudulent activities and mishandling of trade secrets. They claimed that he invested $1 million in Curve in 2020 and subsequently deposited the investment funds into Curve's liquidity pool. The three VC firms did not receive CRV tokens nor a refund.