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CRV has experienced a 75% turnaround after self-proclaimed “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-proclaimed “applied game theorist” responsible for Mango Markets’ $100 million exploit last month, has begun shorting Curve DAO’s CRV token. On the chain sleuths noticed Tuesday morning that Eisenberg had borrowed 88 million CRV tokens from lending protocol Aave and sold them early in the market over the past week.
Curve Finance is a decentralized exchange that focuses on stablecoins and other low-volatility assets 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 the governance token.
The pressure created by Eisenberg’s sale pushed CRV to $0.40, allowing him to borrow even more CRV from Aave’s Curve pool to sell. Many onlookers speculate that Eisenberg was targeting Curve founder Michael Egorov with his short selling. 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 on the market to pay back its debt, driving 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 up,” tweeted PleasrDAO member Andrew Kang Tuesday, accompanied by a photo of his CRV long position. “Now he’s trying to chase the loan from one of DeFi’s godfathers and that’s when the foot is put down to defend.”
In the following hours, Curve climbed steadily, eventually reaching Eisenberg’s liquidation level just above $0.60. Aave’s liquidation mechanism started selling its USDC collateral to buy back CRV tokens from the market to pay off its debt. However, it seems that many who went long on Curve at $0.40 earlier today also started taking profits around this level, keeping the liquidation short. In total, about $5 million of Eisenberg’s position was liquidated in that case; at the time of writing, his position had begun to liquidate againpushing CRV to over $0.70.
While many viewers view this episode as a loss for Eisenberg, others are not convinced. Before Eisenberg’s Aave position began to be liquidated, he was cryptic tweeted, “Take a day off to spend time with family. I hope you’re on your best behavior.” This message was widely seen as “psyops”, or tactics intended to manipulate one’s opponents or enemies using psychology. The idea is that Eisenberg is trying to give his opponents a false sense of security before revealing his ultimate plan.
Eisenberg could also have a much larger off-chain long position on CRV, intending to liquidate his Aave loan from the start to spur CRV bulls and take advantage of the volatility. Others argue that he is bidding his time before using more capital to lower the CRV price and taking another shot at Egorov’s $0.25 liquidation price.
Another slightly bizarre 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 on GitHub earlier today.
Eisenberg gained notoriety in crypto circles after using 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 Mango Market’s team, returning half of the stolen funds to cover user losses if Mango Markets used its treasury funds to cover losses.
Eisenberg called Mango Markets’ operation a “highly profitable trading strategy,” which sparked outrage in the DeFi community. While some in the DeFi community believe that Eisenberg did nothing wrong, others have heavily criticized his actions and their negative effect on space.
Whether Eisenberg is defeated or whether his partial liquidation was all 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, possibly to deposit as collateral to stop his Aave liquidation.
Disclosure: At the time of writing this piece, the author owned ETH and several other cryptocurrencies.