- CRV deposits on AAVE raise flags due to concerns about acquired tokens being used for collateral.
- CRV bounces back after losing in the latest crash.
The amount of CRV in lending and lending positions in Aave has grown rapidly over the past two weeks. So much so that it is starting to worry that the token may be at risk of crashing.
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Reportedly, CRV has been depositing in borrowing and lending positions on AAVE rose to $200 million. Similarly, USDT holdings have also risen to about $60 million. But these findings have raised concerns in the crypto community and for good reason.
First, we need to understand the sequence of events that led to the rise in lending and lending positions. As it turns out, Curve Finance raised its debt ceiling through a proposal that was passed on June 8. Less than two weeks later, the value of borrowing and lending positions has grown exponentially.
The concerns arose because Michael Egorov, CEO of Curve Finance, recently made large trades by depositing CRV into AAVE V3. Kaiko research analysts observing the situation believe that Egorov used this as one of the ways to liquidate CRV obtained from Curve Finance’s acquisition scheme. This is because selling those tokens directly on the market would dilute the price.
Does CRV run collateral risks?
According to the analysis, about 95% of the CRV on AAVE was funneled through Egorov’s wallet. The main concern at the time of writing was that a liquidation frenzy could trigger another major crash. The downside of CRV since April has already wiped out a significant chunk of YTD gains. It changed hands at $0.67 after rising 20% from its mid-month lows.
Source: TradingView
Can CRV maintain the current uptrend? Perhaps on-chain metrics can reveal something about the current demand. Price volatility was higher in the second half of the month. Investors were still less than thrilled, however, given that weighted sentiment is still within the four-week low.
Source: Sentiment
On-chain data also revealed a surge in network growth for Curve Finance, especially in the second week. However, the same statistic now indicated a slowdown in network activity. This was consistent with observations related to whales. The latest data on the supply of top addresses shows that stocks have fallen since the beginning of June.
Source: Sentiment
How much are 1,10,100 CRVs worth today
Based on the above findings, it was clear that CRV’s performance was based on the general condition of the market. Nevertheless, many investors have chosen to err on the side of caution, perhaps in light of credit and credit issues.