AAVE, the governance token of the decentralized finance (DeFi) protocol Aave, experienced a 17% decline between July 30 and August 1, reaching the $62 level.
While the $62 support has demonstrated its resilience, the current price of $64.40 is still 12% below the daily close on July 30. Investors are now questioning whether this movement signifies a more cautious approach to the sector or if other factors are exerting pressure on the AAVE token price.
Part of the recent movement in the AAVE token can be attributed to the risks of cascading liquidations on DeFi protocols, resulting from the Curve Finance pool exploit that commenced on July 30. However, Aave’s decentralized liquidity protocol has successfully survived previous identical scenarios and the protocol has a substantial $295.6 million deposited in its Safety Module.
Notably, Michael Egorov, the founder of Curve, currently holds a substantial $76.6 million loan backed by 357.3 million CRV tokens across three DeFi applications, as reported by Delphi Digital. This represents 40.5% of the entire CRV circulating supply and poses risks to the ecosystem, raising concerns about potential liquidation repercussions on major protocols, including Aave.
18/ Update: Having paid down some of his loans, Egorov has managed to significantly reduce his liquidation price points.
*Note on his Fraxlend position: Utlization has fallen to 37% so the APY should continue to decline* pic.twitter.com/LUyeopWRMp
— Delphi Digital (@Delphi_Digital) August 1, 2023
According to Delphi Digital data, specifically on Aave, Egorov holds 267 million CRV tokens, backing a 54.2 million Tether (USDT) loan. With a 55% liquidation threshold, the current liquidation price for the CRV token stands at $0.37, which appears relatively secure at the moment. However, it’s essential to note that Egorov is paying a significant 50% APY for this loan.
This situation serves as evidence that Aave and other top DeFi protocols function as intended, without special rules or bailouts, even for project founders. While the Curve token debacle continues, there’s no distinct issue with the Aave protocol, aside from notable players taking assertive actions to close their positions.
Aave stablecoin trading below $1 is an ongoing concern
Another factor influencing AAVE’s token performance is the stablecoin GHO, which has been trading below the $1 peg since its launch on July 16. According to 21Shares’ on-chain…
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