Review of the CRV Bull-Bear Battle and Current Short-Selling Cost Evaluation

CRV Bull-Bear Battle and Short-Selling Costs Review

Recently, the founder of Curve’s cash-out behavior and continued collateralization of CRV to borrow stablecoins have become a focus of market attention amidst the impact of the SEC incident on market liquidity. Yilan, a researcher at LD Capital, reviewed the bearish operations in last year’s CRV bull and bear battle and estimated that the cost of shorting currently will be very high.

Shortly after FTX’s bankruptcy last year, when the market lacked confidence and liquidity was extremely tight, a whale borrowed a large amount of CRV tokens from Aave and transferred them to the OKX exchange, borrowing a total of 47 million CRV. Influenced by the whale’s selling pressure, the price of CRV fell from $0.545 to $0.424, reaching a low of $0.4 due to large-scale short selling through repeated on-chain borrowing and token transfer.

Methods of profiting from short selling: one is to conduct high-leverage short selling trades on exchanges such as OKX, taking advantage of the lack of market liquidity and strong long-side interference to obtain high-probability profit opportunities. Another is to convert short positions into long positions. When market liquidity is exhausted, shorts close out their positions and switch to long positions. In addition, centralized exchanges also offer opportunities for borrowing coins to short sell, but the lack of data makes it difficult to calculate costs.

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Currently, the total on-chain liquidation amount of CRV is $113 million, of which 99% (289 million CRV) is concentrated around the $0.375 price. This means that borrowing coins to short sell may be sufficient to push the price down to the liquidation price, but Curve’s founder has the ability to add margin to further lower the liquidation price, making the cost of simply short selling very high.

Reference: https://twitter.com/Yila722/status/1668858001950756866

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