Curve Founder Repays 1.3M USDT of Aave Loan to Reduce Liquidation Risk: Data

A wallet linked to Michael Egorov, the founder of decentralized exchange (DEX) and automated market maker protocol Curve, has reduced its on-chain debt by repaying 1.35 million USDT of a loan on the decentralized lending platform, Aave.

Egorov’s move comes as Curve’s native token (CRV), used as the loan’s collateral, significantly declined in the past week, reducing the loan’s health factor and increasing the liquidation risk.

Egorov Returns 1.3M USDT to Aave

Egorov started borrowing stablecoins on Aave in April. Data from blockchain analytics platform Debank shows that the Curve founder has deposited 288.7 million CRV tokens worth $173 million on Aave to borrow about 64 million USDT in an open position. The CRV tokens represent roughly 34% of the asset’s total supply.

Analysis from blockchain sleuth Lookonchain revealed that Egorov sent $37.7 million worth of USDT to crypto exchange Bitfinex, while $51 million in USDC was sent to market-making protocol Wintermute Trading.

Three days ago, the open position had a health rate of 1.68. However, at the time of writing, the health factor was at 1.58 due to the declining value of CRV, which has plummeted by more than 20% in the past seven days. Data from CoinMarketCap shows that the asset was trading at $0.60 as of press time.

The collateral will be automatically liquidated if the health rate drops below 1.00. Egorov was forced to return some USDT tokens to curb the liquidation risk.

Community Reacts

The high CRV stake involved in the loan has caught the attention of the decentralized finance (DeFi) community, as it may lead to major selling pressure on the asset, increasing the risk of platform liquidation.

Gauntlet, an entity that manages DeFi risk, has submitted a proposal to the Aave community, suggesting that all CRV tokens used as collateral on the V2 platform be frozen, and the loan-to-value (LTV) ratio for CRV be set to 0. This is to prevent the account linked to Egorov from adding more CRV as collateral to increase concentration risk and minimize the possibility of accruing bad debt.

Meanwhile, the Curve-Aave loan fiasco has caused USDT to slip slightly from its 1:1 peg with the USD. While whales and investors are taking arbitrage opportunities to swap the assets for USDC and DAI, Tether CTO Paul Ardoino has assured the community that the company is ready for any amount of redemptions.