Justin Sun, the founder of Tron blockchain, has come forward to lend a hand to Curve Finance founder, Michael Egorov, who faces a looming debt situation following a multi-million dollar exploit of his protocol.
As per blockchain data, Sun purchased about 5 million $CRV from a wallet tagged “Curve.fi Founder”. While this was bought at an average price of $0.4 in an over-the-counter transaction, amounting to just over $2.3million, it is more than the $0.37 price level at which Egorov’s loan could be liquidated.
The Curve founder has been under much pressure to liquidate his $168m stash of $CRV (Curve’s native token) made through securing loans from multiple DeFi protocols. This amount was equal to almost 34% of the token’s total market capitalisation.
Egorov had locked up this stash in $CRV tokens on Aave to take out a $63m loan in Tether’s $USDT stablecoin. As per the data revealed by DefiLlama, the level Egorov’s $CRV collateral gets liquidated is 37 cents, whereas $CRV currently trades for around 60 cents.
On top of this, the Curve founder also borrowed $17m of the $FRAX stablecoin using $32m of $CRV as collateral on stablecoin issuer Fraxlend, along with a $18m loan on decentralised platform Abracadabra.
However, the forced liquidation of the $168m stash would not have worked out well for Curve which is one of the leading decentralised exchange DeFi with about $3billion in liquidity.
Following the recent exploit which accounted for a loss of about $70m, many of its investors also withdrew funds as a precaution. This further dropped the total value of assets locked on Curve to $2.1bn from $3.7bn.
Justin Sun’s aid could therefore save a potentially bad loan, as according to him, a liquidity pool that utilises tether stablecoins issued on the Tron network would “amplify user benefits”. As “steadfast partners”, he tweeted about his commitment to support the platform saying: “Our joint efforts will introduce an @stusdt pool on Curve, amplifying user benefits. Together, we aim to empower the community and forge decentralized finance. stUSDT is described as the “first real-world asset protocol on the Tron Network.”
Another motivation factor behind Sun’s gesture could also possibly be to protect his own outsized token holdings from being hit.
Curve Finance carries much importance for stablecoin swap markets, which luckily wasn’t affected in the recent attack. However, the Sunday exploit drove the price of $CRV, which was trading at $0.601, down by over 6% daily, as per CoinGecko.
$CRV is one of the preferred assets which is commonly used as a trading pair and ballast in trading pools across DeFi, including on popular platforms like Sushi and Uniswap. It is also a popular form of collateral on loan-making platform Aave.
Bearish sentiments surrounded the token as traders piled into short positions in the perpetual futures market fearing potential liquidation of the founder’s crypto borrowing. If this is sold into a market where prices are already falling, it could destabilise the broader decentralised finance ecosystem.