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The major exploit of the decentralized finance (DeFi) platform Curve Finance earlier this week has led to a major price correction for several DeFi tokens in the market.
Curve’s native crypto CRV coin has experienced a 25% drop in value within a span of three days due to a recent hack on the platform. The founder, Michael Egorov, has borrowed over $100 million using CRV as collateral in different crypto lending projects.
The concern arises from the possibility of further CRV declines leading to forced liquidations of the loan positions, potentially causing additional losses. Speaking to Bloomberg, Stefan von Haenisch, head of sales trading at OSL SG Pte in Singapore, said:
“If we move lower still and these liquidation levels are hit, we could see a domino effect” across the decentralized finance sector.
Curve Finance is the second-largest decentralized exchange currently in the market after Uniswap. However, as per the DeFiLlama data, the amount of crypto using the Curve Finance service has dropped to $1.9 billion from $3.6 billion earlier.
But Curve Finance Egorov believes that the DeFi industry will survive this incident. “We, and I personally, work on minimizing or eliminating the impact,” he wrote in an email to Bloomberg, while adding that he is also planning to reduce his loans.
DeFi tokens Fall along With Curve Finance (CRV)
The recent Curve incident caused significant declines in mainstream DeFi tokens. COMP dropped by 18.19% to $61.98, CVX fell by 13.92% to $2.94, FXS declined by 13.11% to $5.16, and AAVE experienced a 12.63% drop to $62.14 in the last 24 hours.
As per DefiLlama, a considerable portion of the collateral is in danger of liquidation if the CRV token falls to 37.5 US cents. Over the past three days, Aave’s native token has seen a 14% drop. In DeFi, many view Curve Finance as one of the most important liquidity providers, especially for stablecoins.
The Curve Finance incidence has certainly put some selling pressure across the broader crypto market. The Bitcoin price has now slipped under $29,000 with trading volumes drying up a bit. The top ten altcoins have also been correcting 2-5% consecutively over the last two days.
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