- CRV deposits on AAVE raise flags due to concerns about vested tokens being used for collateralization.
- CRV bounces back after taking on losses during the latest crash.
The amount of CRV in lending and borrowing positions in Aave has been growing rapidly in the last two weeks. So much so that it is starting to raise concerns about the token potentially being at risk of a crash.
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CRV deposits into lending and borrowing positions on AAVE have reportedly soared to $200 million. Similarly, USDT positions have also been on the rise to around $60 million. But these findings have been raising concern in the crypto community and for a good reason.
First, we have to understand the sequence of events that have led to the surge in lending and borrowing positions. It turns out that Curve Finance raised its debt ceiling through a proposal that was passed on 8 June. Less than two weeks in and the value of borrowing and lending positions have grown exponentially.
The concerns arose because Curve Finance CEO Michael Egorov recently conducted large transactions depositing CRV into AAVE V3. Kaiko Research analysts observing the situation believe that Egorov has been using this as one of the ways to liquidate CRV obtained from Curve Finance’s vesting schedule. This is because selling those tokens directly in the market would dilute the price.
Will CRV face collateralization risks?
According to the analysis, roughly 95% of the CRV on AAVE was channeled through Egorov’s wallet. The biggest concern at press time was that a liquidation frenzy may trigger another major crash. CRV’s downside since April has already wiped out a significant proportion of its YTD gains. It exchanged hands at $0.67 after a 20% upside from its mid-month lows.
Source: TradingView
Can CRV sustain its current upside? Perhaps on-chain metrics can reveal a thing or two about the current state of demand. Price volatility has been higher in the second half of the month. However, investors were still not as excited given that the weighted sentiment is still within its lower four-week range.
Source: Santiment
On-chain data also revealed a surge in network growth for Curve Finance especially in the second week. However, the same metric now indicated a network activity slowdown. This aligned with observations regarding whales. The latest data on supply held by top addresses reveals a drop in holdings since the start of June.
Source: Santiment
How many are 1,10,100 CRVs worth today
Based on the above findings, it was clear that CRV’s performance was based on the overall state of the market. Nevertheless, many investors have opted to lean on the side of caution perhaps in light of the lending and borrowing concerns.
