Curve Finance protocol is currently facing significant risks that could potentially lead to a crisis. A user on social network X, known as Defi_Made_Here, has pointed out several factors that contribute to this precarious situation. The protocol's systemic risk, which was not fully addressed after a hack in the summer of 2023, remains a ticking bomb.
One of the key concerns is the co-founder, Mikhail Egorov, who has been struggling to repay cash loans for an extended period. Despite recent news of partial loan repayments, Egorov still carries a substantial debt. Shockingly, his debt is increasing by $1.7 million every month, adding to the financial strain.
1/🧵 $CRV is a ticking bomb
— DeFi Made Here (@DeFi_Made_Here) January 8, 2024
The Curve ecosystem is in the hands of "questionable people/entities" and Mich's ability to service his debt which grows $1.7M/month.
I will explain why I see a light at the end of the tunnel and how @0xSifu is playing this game. pic.twitter.com/KPZ97JVNkm
In an attempt to alleviate the situation, Egorov took additional loans worth $75 million in the fall of 2023, using Curve's stablecoin, crvUSD, as collateral. However, this move introduces further risks to the protocol's stability.
The primary liquidity provider involved in this scenario is DeFi developer Michael Patryn, also known as 0xSifu. The analyst reveals that Patryn is "shorting" the protocol's native token, CRV, which puts additional pressure on Curve Finance and its lenders.
Furthermore, it is anticipated that 0xSifu may withdraw liquidity from the pool once the protocol's OTC tokens become tradable in February 2024. This action will serve as a real stress test for the protocol, potentially exacerbating the risks involved.
Defi_Made_Here emphasizes that while this development is not inevitable, it poses significant risks to the entire Curve Finance protocol.
As of now, Curve Finance holds the 18th position among the largest DeFi projects, with approximately $1.6 billion worth of assets locked in the protocol, according to DeFiLlama.
It is worth noting that the founder of Curve Finance has previously managed to repay all debts on #Aave, demonstrating a commitment to resolving financial obligations.
In conclusion, the risks facing Curve Finance protocol are substantial and require careful attention. The systemic risk, co-founder's debt, and the actions of liquidity providers all contribute to the potential crisis. It is crucial for the protocol's stakeholders to address these concerns promptly to safeguard the stability and integrity of #Curve Finance.
