Curve Protocol released its native stablecoin crvUSD via exchange liquidity. The news was released at the same time that a trader borrowed the majority of the Curve DAO token (CRV) supply, totaling over $50 million. In the last eight hours, the price of CRV has increased sharply, bringing that position dangerously close to, then crossing over, its liquidation point.
Based on Discord discussions about the trade, it is assumed that the trader is Avraham Eisenberg, who was previously associated with the contentious Mango Markets exploit on the Solana network.
A Twitter comment request for Eisenberg did not receive a prompt response. By 12:20 PM ET on Tuesday, the trader or trading group had about $58 million in USDC to support a $50 million loan from CRV.
All of the position had been liquidated by 1:10 PM ET, went on to left the Aave protocol with a bad debt worth 2.64 million CRV or almost $1.7 million.
It’s unclear what the trading plan was, but the Aave position was so big that it couldn’t be completely liquidated with the collateral on hand. CRV’s value increased to a high of roughly $0.71 when the position was unwound, according to data gathered by Blockworks, because the supply of spot CRV was sufficiently scarce.
The stablecoin will keep its peg to the US dollar through overcollateralization, according to Curve’s founder, Michael Egorov.
According to its most recent white paper, the Lending-Liquidating Automated Market Maker Algorithm (LLAMMA), which translates between collateral and the stablecoin, would be used to carry out the stablecoin’s design. Therefore, the automated market maker will change deposits to a stablecoin if the price of a collateral (ETH) declines (USD).
To determine where the collateral is, LLAMMA will automatically generate bands; if the collateral’s value changes, it will be changed to the stablecoin.
The crvUSD will keep its peg to the USD through a peg-keeping reserve that is created by an asymmetric deposit into a stableswap pool made up of the stable token and a redeemable reference coin. An asymmetric deposit occurs when the outcome of the deposit has more profit than loss or risk taken to achieve the profit.
The timing of the launch is intriguing; it seems to have led to a significant increase in the price of CRV, endangering the security for the trader’s loan.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2022/11/24/curve-launches-crvusd-stablecoin-50-million-liquidation-follows/