In recent days, the value of the most prominent DeFi coins, which were developed on the Ethereum blockchain, has witnessed a significant decline. Concerns that arose as a result of a hacking event that took place on Curve Finance, the second-largest decentralized exchange for stable swaps on Ethereum, spurred this decline and caused it to continue.
According to information provided by DeFiLlama, the total deposits held by Curve Finance amount to a sizable amount, totaling $2.09 billion. The general market sentiment for leading Ethereum-based DeFi coins has suffered as a consequence of the attack and the attendant anxieties.
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The security of the protocol was compromised on July 30, which allowed attackers to take advantage of a flaw in the Vyper programming language. As a direct consequence of this, they were successful in stealing around $52 million from at least four different pools within Curve Finance.
As a direct result of this occurrence, there was a considerable effect on the value of the most valuable Ethereum DeFi coins. The Glassnode DeFi Blue-Chips Index, which reflects the eight most valuable DeFi tokens based on market capitalization, had a decline of 6.7% from its three-month high on July 29, the day before the Curve Finance hack. This dip occurred after the index reached a new all-time high the previous day.
According to Coingecko’s findings, the DeFi Pulse Index has witnessed a drop of 7.3% over the course of the past week. This index comprises the top 10 DeFi tokens in terms of market capitalization.
Curve DAO (CRV), one of the tokens most negatively impacted by the movements of these two indices, saw the most substantial decline in value over the past week, dropping by 20.5%.
After Compound (COMP), Synthetix Network (SNX) and Aave (AAVE) each had losses of 17% and 14%, respectively, during the same time period as Compound’s (COMP) 18% drop in share price.
The risk to the AAVE holder from CRV loans
The cyberattack that was directed against Curve Finance brought to light a potential risk of contagion for the entirety of the DeFi ecosystem, particularly with regard to contracts made using Vyper on other protocols.
In addition to this, Curve DAO was exposed to a second large risk that was the result of its creator, Michael Egorov, having taken out substantial loans. The majority of these loans came through the well-known online lending marketplace known as Aave.
According to the information obtained from Egorov’s Ethereum wallet, his most significant loan consisted of a sum of $49.2 million USDT borrowed against a total of 257.4 million CRV tokens, the worth of which was around $148.6 million.
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Forcible settlement of Egorov’s loan might trigger a widespread liquidation of Curve tokens, bringing the price of CRV on Aave down to below the principal loan amount.
Because the AAVE token’s Safety Module is designed to be liquidated if the loan amount exceeds the value of the CRV collateral, token holders would be in a precarious position in this scenario.
Despite Egorov’s efforts to mitigate his debt and repay part of the debts through OTC negotiations with various funds, developers, and prominent DeFi users, there are still hazards that must be taken into account.
Curve hack causes DeFi IDs to change.
Despite the fact that Compound was not immediately affected by the hack that occurred on Curve, the value of its governance token decreased after making large gains over the course of the previous weeks.
According to data provided by Coingecko, the COMP coin experienced a remarkable growth of 153% from June 25 to July 17, when it reached a new yearly high price of $77.34. This increase was spurred by positive expectations surrounding a new DeFi protocol called Superstate, which was developed by Compound’s founder, Robert Leshner. Another factor that contributed to this surge was the prospect for a short-squeeze.
However, because there were no formal statements regarding the utility of the COMP token in Leshner’s new project or other positive causes, the token gave up part of its gains and was last traded at $59.45, which represents an increase of 89% from the beginning of the year to the end of the year.
Token, Product. Right?
In a similar vein, the Synthetix Network (SNX) had a huge increase, with its price hitting a three-month high of $2.99 in July. This was the result of a cooperation with Jump Crypto, which is both a cryptocurrency venture fund and market maker.
The goal of this partnership was to increase the liquidity of the protocol. However, as a result of the attack that occurred on Curve Finance, the value of the SNX token has experienced a reduction of 18.4% in comparison to the previous week.
Despite this, SNX has been on an upward trend, posting a gain of 10.6% over the past 30 days and an amazing gain of 68.7% so far this year.
On the other hand, purchasers of Maker (MKR) managed to keep their impressive gains from July thanks to increasing exposure to real-world assets and a tokenomics update implemented by the community to promote MKR buybacks.
Both of these factors contributed to the success of MKR buyers. Over the past week, the value of MKR has increased by 2.7%, and it has increased by an astounding 151.6% since the beginning of the year.
During the previous week, Uniswap (UNI) and Sushi (SUSHI), two of the other decentralized exchange tokens that are in competition with Curve, each witnessed gains of 4.2% and 7.9%, respectively. Balancer (BAL), on the other hand, experienced a drop of 6.2% within the same time period.