Curve Finance debt will cause 'one more stress test' in February — Analyst

Curve Finance debt will cause 'one more stress test' in February — Analyst

Jan 08. 2023

By Tom Blackstone

The systemic risk that lies at the heart of the Curve Finance protocol has not been completely resolved, and the protocol will face “one more stress test” in February, according to a Jan. 8 report from pseudonymous crypto investment analyst and X user DeFi Made Here.

According to the report, a large number of Curve (CRV) tokens will become tradeable in the coming weeks, and the sale of these tokens may lead to “a similar situation which happened back in August” where the CRV token threatened to collapse in price. However, DeFi Made Here also cautioned that this scenario is only a possibility.

According to their X profile, DeFi Made Here is an analyst for crypto investment fund Alphabeth Capital and an adviser for Web3 developer Good Entry Labs.

The founder of Curve Finance, Michael Egorov, owed $100 million in debt to various decentralized finance (DeFi) protocols as of Aug/ 1, according to crypto research firm Delphi Digital. This debt was backed by CRV tokens, and critics pointed to it as a risk to the Curve protocol and the DeFI system as a whole. However, when Curve was exploited for $62 million in August, Egorov paid back some of his debts, and the protocol seemed to have weathered the storm. At the time of the exploit, the CRV token price was approximately $0.63. It has since fallen to $0.55, a 12.7% decline according to data from CoinMarketCap.

In their report, DeFi Made Here suggested that this calm in the market may be masking an underlying weakness in the Curve protocol. “$CRV is a ticking bomb,” the analyst stated. Its ecosystem “is in the hands of ‘questionable people/entities’ and Mich's ability to service his debt which grows $1.7M/month [is becoming more difficult].”