Amid growing uncertainty around Curve exposure for many decentralized finance protocols, Aave Chan founder Marc Zeller has proposed that Aave Treasury buy $2 million worth of CRV tokens in USDT from Curve Founder Michael Egorov.
The proposal noted that the $2 million worth of Curve DAO Tokens (CRV) acquisition would send a strong signal of DeFi supporting DeFi while allowing the Aave DAO to strategically position itself in the Curve wars and help Aave’s decentralized multi-collateral stablecoin GHO’s liquidity.
At the current price, $2 million worth of USDT would net 5 million CRV tokens and Zeller suggested these newly bought curve tokens could be locked as veCRV for four years. These tokens could then be used for voting rights on the Curve platform where Curve users would be able to use it to provide liquidity for token pairs that involve GHO.
“The treasury balance and the predicted lower costs for service providers for the 2023-2024 budget would allow this strategic acquisition while maintaining a conservative stance with DAO treasury holdings,” the proposal noted.
The proposal garnered mixed reactions from the Aave community where some claimed that the DeFi protocol should look for ways to reduce its exposure to the risk of CRV liquidation while adding:
“This is a joke and goes against the best interest of both Aave stakeholders and Aave lenders, just to help a user who took too much leverage. How is this decentralized finance?”
A few others lauded the proposal claiming it would help the protocol to de-risk the current CRV over leverage and also help the GHO stablecoin growth.
Separately, Huobi’s co-founder Jun Du also purchased 10 million CRV tokens for $4 million from Curve Finance founder.
Michael Egorov, the Curve founder, has total outstanding loans of over $100 million from various lending protocols. Out of this $70 million loan in USDT is on Aave v2, using CRV as collateral. Aave’s risk parameters state that CRV will be at risk of liquidation if its price falls to around $0.32.
CRV is currently trading at $0.59 and a price decline of nearly 60% would lead to liquidation. In this case, the borrower’s deeded collateral will be liquidated to pay back the borrowed asset. This means that CRV will be sold for USDT, resulting in bad debt.
Egorov has been on a CRV selling spree to manage his multi-million loan positions. Ever since the exploit on the Curve protocol, its founder has sold millions worth of CRV tokens through over-the-counter trades.