The native token of DeFi giant Curve (CRV) slumped 20% on Thursday after the platform proposed removing support for UST.
CRV plummeted to as low as $0.9- its lowest level in 16 months. It is now trading at $1.10, having recovered mildly.
The token’s losses were triggered just after Curve proposed removing incentives for maintaining liquidity pools consisting of Terra’s UST. The proposal comes about two weeks after a devastating crash left UST severely de-pegged from the dollar.
The Curve community has voted overwhelmingly in favor of the proposal, given that UST’s de-pegging also threatens to destabilize Curve’s other liquidity pools.
CRV token plummets after the proposal
While the proposal overall represents a net positive for Curve, it received some criticism on Twitter. Users accused the platform of abandoning UST holders during a crucial period.
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Good bye UST – it was a good experiment, but it didn’t work out: UST supply grew much larger than Luna liquidity which can absorb redemptions.
-Curve Finance on Twitter
Given how sudden the CRV drop was, and that markets have been relatively steady this week, it may be possible that the dump was triggered by a small group of traders that opposed the UST exclusion.
The sell-off appears to have spread into Curve’s total value locked (TVL). Data from Defi llama shows Curve’s TVL is down about 9% in the past 24 hours, at $9.3 billion.
Curve is the largest DeFi exchange that caters largely to stablecoin trades. It does so by maintaining huge liquidity pools to facilitate transactions.
Liquidity pools are maintained through stablecoin deposits, on which Curve offers interest payments.
Curve still benefited from UST implosion
But while the exchange is still exposed to UST, the exchange benefited greatly from UST’s downfall. Its “3pool” liquidity pool is now the largest liquidity pool in DeFi, after UST’s implosion scuttled plans by Terra founder Do Kwon to maintain a “4pool.”
Twitter user @Dynamo_Patrick pointed out that during UST’s de-pegging, Curve’s revenue skyrocketed by 625% from the prior week, as traders attempted to dump their UST holdings.
Still, given its exposure to UST, the platform saw a significant drop in its TVL in wake of the crash.
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