Main Ethereum-based DeFi tokens have suffered a big downturn within the final couple of days amid fears that adopted final weekend’s Curve Finance hack.
Curve Finance is the second-largest decentralized change for secure swaps on Ethereum after Uniswap, with complete deposits value $2.09 billion, per DeFiLlama knowledge.
The protocol was hacked on July 30, which noticed attackers make off with roughly $52 million as a consequence of a vulnerability within the Vyper programming language, affecting no less than 4 Curve Finance swimming pools.
Glassnode’s DeFi Blue-Chips Index of the highest eight Ethereum DeFi tokens by market capitalization dropped 6.7% from its three-month excessive on July 29, a day earlier than the Curve Finance hack.
The DeFi Pulse Index of the highest ten DeFi tokens by market capitalization traded 7.3% decrease since final week, based on knowledge from Coingecko.
The largest losers from the 2 indices embody Curve DAO (CRV), down 20.5% over the week, adopted by Compound (COMP) down 18% throughout the identical interval, and Synthetix Community (SNX) at damaging 17% and Aave (AAVE) at damaging 14%.
AAVE holder’s danger as a consequence of CRV loans
The Curve Finance hack uncovered DeFi to one thing of contagion danger arising from contracts constructed utilizing Vyper on different protocols.
One other acute danger to Curve DAO got here from liquidating hefty loans taken by Curve’s founder, Michael Egorov. His largest lending place stands on the favored lending protocol Aave.
Egorov’s mortgage quantity final stood at $49.2 million USDT borrowed in opposition to 257.4 million CRV tokens value $148.6 million, per his Ethereum pockets knowledge.
If Egorov’s mortgage have been liquidated, it may set off an enormous sell-off of Curve tokens, threatening to drop CRV worth beneath the principal mortgage quantity on Aave.
This put AAVE token holders in danger, because the deficiency between the principal quantity and CRV collateral would have been paid by promoting AAVE from its Security Module, as per its design.
Whereas Egorov has improved the well being of his debt place and repaid a few of his loans after making OTC offers with quite a few funds, builders, and energy DeFi customers, the dangers are nonetheless sure.
Curve hack catalyzes correction in DeFi tokens
Although Compound was indirectly affected by the Curve hack, its governance token appeared to shed positive factors from the previous few weeks.
The COMP token rose by 153% from June 25 to achieve a brand new yearly excessive of $77.34 on July 17, per Coingecko knowledge, amid bullish hopes round a brand new DeFi protocol Superstate launched by Compound’s founder, Robert Leshner, and a possible short-squeeze.
Within the absence of an announcement round COMP token’s utility in Leshner’s new endeavor and different constructive catalysts, COMP gave away a few of its positive factors, final buying and selling at $59.45—up 89% year-to-date.
Equally, Synthetix Community (SNX) surged to a three-month excessive of $2.99 in July after forming a partnership with crypto enterprise fund and market maker, Soar Crypto, to enhance the protocol’s liquidity.
Nonetheless, the SNX token gave away its positive factors following the Curve Finance hack—it’s down 18.4% since final week. Nonetheless, SNX is up 10.6% within the final 30 days and 68.7% year-to-date.
As compared, Maker (MKR) consumers managed to carry on to their spectacular positive factors in July because it elevated publicity to real-world property and the neighborhood applied tokenomics replace to extend MKR buybacks. MKR was buying and selling 2.7% greater over the week and 151.6% for the reason that 12 months’s begin.
Curve’s competitor decentralized change tokens, Uniswap (UNI) and Sushi (SUSHI) have been up, respectively, 4.2% and seven.9% over the week. Nonetheless, Balancer (BAL) fell by 6.2% throughout the identical interval.
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