Curve Suffers Rapid Price Decline as Agreements with OTC Buyers Crumble
The trading volume of CRV — the governance token of Curve, a decentralized stablecoin exchange (DEX), has plummeted by 97%.
About a month ago, Curve’s founder decided to strategically reallocate some of the platform’s governance tokens, known as $CRV, to buyers deemed to be “reliable.” The intention behind this move was to settle debts in the DeFi space. This move took place in a challenging context.
Curve recently suffered a significant security breach. Back in July, hackers exploited outdated versions of Vyper—a programming language used for Ethereum smart contracts—in various Curve stablecoin pools. The automated nature of Curve’s pools left them vulnerable to a re-entrancy attack, allowing the hackers to drain multiple pools successfully. The market’s response was brutal; the $CRV token plunged from $0.74 to $0.48 on July 30 and eventually sank to a new 2023 low at $0.40.
The founder’s action comes in the backdrop of a significant slump in CRV trading volumes, which fell 97% from nearly $300 million to a meager $7 million in less than two months after a hacking incident in July 2023.
Buyers of $CRV at a discounted rate of 40 cents—when the market price hovered between 55 and 59 cents—committed to a lock-up period, pledging not to sell the tokens for at least six months. Yet, some reneged on this commitment as the token price began to fall.
A user with the nickname “erwwer” on Opensea was the first to disregard the agreement, sending a substantial 609K $CRV tokens. Etherscan suggests that this wallet probably belongs to DWF Labs, a company that had previously committed to holding the tokens for at least six months.
The price of $CRV has dropped below $0.4, and investors who bought $CRV from Michael Egorov at $0.4 are currently at a loss.— Lookonchain (@lookonchain) September 13, 2023
Investor"0xb0b8" who spent 1M $USDT to buy 2.5M $CRV deposited 609,057 $CRV ($240K) to #Binance an hour ago.https://t.co/cfcSvCPil9 pic.twitter.com/3XjdtSkHuY
CRV’s Struggles in the Trading Arena
Data from market analytics firm Kaiko revealed a drastic downturn in CRV trading volumes, especially on centralized exchanges. Binance, a leading global crypto exchange, witnessed its CRV trading volume plummet from nearly $300 million in late July to just $7 million as of September 12.
Although CRV tokens are available on various trading platforms, including decentralized exchanges like Uniswap, Binance remains the dominant player with a 20% share of CRV trading. The next closest exchange, Bitbox, only holds a market dominance of around 7%.
Future and Implications for Curve Finance
The recent developments concerning Curve and its governance tokens, $CRV, underscore the inherent instability and risks in the crypto sector. The founder’s decision to transfer tokens to supposedly trustworthy buyers for settling DeFi debts, only for some of those buyers to renege on their promises, highlights the uncertainties around such strategies. Additionally, falling trading volumes and a recent hacking incident compound these issues, making the future of the token increasingly unclear.
These events raise significant doubts about Curve’s ability to effectively manage the challenges it faces. The company and its $CRV token face issues that require immediate action to address both market-based and ethical risks, if they aim to rebuild investor trust and achieve growth.
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