Curve Whipsaws 75% as DeFi Degens Squeeze Avraham Eisenberg
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CRV has experienced a 75% swing after self-described “applied game theorist” Avraham Eisenberg launched a plan to short the token that appears to have backfired.
Curve Whale Games
One of crypto’s most notorious whales is waging war against Curve.
Avraham Eisenberg, the self-described “applied game theorist” responsible for last month’s $100 million Mango Markets exploit, has begun shorting Curve DAO’s CRV token. On-chain inquirers noticed on Tuesday morning that Eisenberg had borrowed 88 million CRV tokens from the lending protocol Aave and sold them on the market early last week.
Curve Finance is a decentralized exchange that focuses on stablecoins and other assets with low volatility to maintain low slippage and fees. It is generally considered a more conservative option in DeFi, and is popular with liquidity providers for that reason. CRV is its governance token.
The pressure generated by Eisenberg’s selling pushed CRV down to $0.40, allowing him to borrow even more CRV from Aave’s Curve pool to sell. Many onlookers speculate that Eisenberg targeted Curve founder Michael Egorov with his short sale. Egorov reportedly has loans on Aave backed by CRV token collateral with a liquidation price of $0.25. If Eisenberg can push the CRV price to this level, it will trigger Aave’s liquidation contract and sell Egorov’s CRV to the market to repay the debt, pushing prices down further.
However, several whales picked up on Eisenberg’s attack and started opening long positions to boost the CRV token price. “First he came for Mango and I didn’t speak out,” tweeted PleasrDAO member Andrew Kang on Tuesday, accompanied by a photo of his CRV long position. “Now he’s trying to hunt down the loan of one of the godfathers of DeFi, and that’s when the foot is put down to defend.”
Over the following hours, Curve climbed steadily, eventually reaching Eisenberg’s liquidation level just above $0.60. Aave’s liquidation mechanism began selling his USDC collateral to buy back CRV tokens from the market to pay off his debt. However, it appears that many who had gone long on Curve earlier today at $0.40 also started taking profits around this level, cutting the liquidation short. Altogether, about $5 million of Eisenberg’s position was liquidated in that case; at the time of writing, his position had begun to unwind again, pushing CRV above $0.70.
While many viewers mark this episode as a loss for Eisenberg, others are not convinced. Before Eisenberg’s Aave position began to be liquidated, he went cryptic tweeted, “Take time off to spend time with family, hope you are all behaving.” This post was widely perceived as “psyops”, or tactics meant to manipulate one’s opponents or enemies using psychology. The idea is that Eisenberg is trying to lull his opponents into a false sense of security before revealing his ultimate plan.
Eisenberg may also have a much larger off-chain long position on CRV, and intended his Aave loan to be liquidated from the start to stimulate CRV bulls and profit from the volatility. Others argue that he is biding his time before committing more capital to push the CRV price down and take another shot at Egorov’s liquidation price of $0.25.
A more slightly strange theory is that Egorov and Eisenberg planned the whole spectacle from the start to generate interest in the Curve protocol. Coincidentally, Egorov published the code for Curve’s upcoming stablecoin earlier today on GitHub.
Eisenberg has gained notoriety in crypto circles after he used price manipulation tactics to drain the Solana-based Mango Markets protocol of $100 million in user funds in October. After revealing himself to the public, Eisenberg made a deal with the Mango Markets team, returning half of the stolen funds to cover user losses if Mango Markets used its own funds to cover losses.
Eisenberg called Mango Market’s exploitation of a “highly profitable trading strategy,” sparking outrage in the DeFi community. While some in the DeFi community believe Eisenberg did nothing wrong, others have strongly criticized his actions and their negative effect on the space.
Whether Eisenberg has been beaten or whether his partial liquidation was part of his plan remains to be seen. DeFi enthusiasts will be watching closely to see what happens next. Eisenberg also appears to be moving money around, possibly to put up as collateral to stop his Aave liquidation.
Disclosure: At the time of writing this piece, the author owned ETH and several other cryptocurrencies.