Amid rising uncertainty in the DeFi space surrounding Curve, Aave founder Marc Zeller has proposed that the Aave treasury buy $2 million worth of Curve DAO Token (CRV) from Curve founder Michael Egorov with USDT. The purchase would demonstrate DeFi’s support for DeFi, while also giving the Aave DAO the chance to strategically position itself in the Curve wars and help liquidity for the decentralized multicollateral stablecoin, GHO.
At the current market rate, 2 million USDT would net 5 million CRV, and Zeller suggested that the tokens be locked up as veCRV for four years. The tokens can then be used for voting rights on the Curve platform, where users can provide liquidity for GHO pairs. The proposal noted that the treasury balance and predicted lower costs for service providers for the 2023-2024 budget could make this strategic acquisition possible while still maintaining a conservative stance with the DAO treasury.
The Aave community gave mixed reactions to the proposal, with some arguing that the DeFi protocol should look at ways to reduce its exposure to the risk of CRV liquidation. One community member said: “This is a joke and goes against the best interest of both Aave stakeholders and Aave lenders, just to help a user who took too much leverage. How is this decentralized finance?” Others applauded the proposal, saying it would help the protocol derisk the current CRV overleverage and help GHO grow.
Meanwhile, Huobi co-founder Jun Du purchased 10 million CRV for $4 million from Egorov. Egorov has outstanding loans of over $100 million from various lending protocols, including a $70 million loan in USDT on Aave v2, using CRV as collateral. Aave’s risk parameters indicate that CRV will be at risk of liquidation if its price drops to around $0.32. Currently, CRV is trading at $0.59, meaning a 60% decrease in price would lead to liquidation. If that happens, the borrower’s collateral will be sold for USDT, resulting in bad debt.
Thus, Egorov has been selling large amounts of CRV to manage his multimillion-dollar loan positions, especially after the Curve protocol was exploited. He has sold millions of dollars worth of CRV tokens via over-the-counter trades.
