the liquidation of the FRAX loan and Erogov's CRV-backed loan of 63.2 million tether from leading and borrowing marketplace Aave ever since late Sunday's Curve exploit sent CRV tanking.
In other words, the interest rate can become astronomical unless more liquidity flows into the pool, bringing the utilization rate lower,crypto research firm Delphi Digital. In that case, the astronomical interest rate alone could trigger the liquidation of Erogov's FRAX loan, putting additional pressure on the CRV token and increasing the risk of liquidation on the bigger Aave loan.
"He [Erogov] borrowed FRAX using CRV as collateral on Fraxlend. However, because people are withdrawing FRAX from the pool, fearing bad debt in the event of CRV liquidation, the APY has significantly increased," Ignas explained."He now needs more FRAX deposited to that CRV/FRAX lending pool. That's why the introduction of a new pool on Curve, equipped with CRV incentives."
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Source: Reuters - 🏆 2. / 97 Read more »