Abracadabra Finance has proposed an aggressive measure to liquidate a massive loan taken against CRV (CRV) tokens. The platform is proposing to raise interest rates on the loan exponentially to 200%, effectively squeezing out the borrower. “Given the current outstanding principal is $18M, the base rate would be 200%. At this interest rate, the loan would be fully covered within 6 months,” the proposal read. The move seeks to reduce Abracadabra’s overall CRV exposure to just $5 million worth of tokens. A staggering 99.95% of the Abracadabra community has voted in favor of the proposal as of Wednesday at 13:00 UTC, governance data shows.
The loan was taken by Curve Finance founder Michael Egorov at a current rate of 18%. The proposed interest rate hike is not a total interest rate bump, but a gradual rate that starts at 200% and decreases as the loan is paid back by automatically selling CRV tokens. Developers expect the loan to be paid back in six months with such a strategy, with all proceeds going to the Abracadabra treasury. “We believe this solution will reduce negative externalities associated with such positions compared to a simple interest rate hike,” developers wrote in the proposal.
The move comes after Curve Finance suffered a Sunday exploit that drove down the price of the CRV token, putting a $168 million stash of founder Michael Egorov’s money at risk of being liquidated. This created bearish sentiment for the tokens among traders alongside concerns that liquidated assets would have to be sold into a market where prices are already falling. The liquidation of such a large position could put pressure on other DeFi protocols because CRV is used as a trading pair and ballast in trading pools across the ecosystem.