A massive Curve – CRV short on the lending platform Aave, by the famous ponzi shorter (92M CRV) is testing the limits of DeFi.
Curve – CRV Short
With a onchain liquidation at .62$, the market is pushing the price not in his favor. If it reaches his liquidation price he will be destined to lose a BIG amount.
But not only this, with taking on this giant CRV short, he is implementing a possible insolvency scheme regarding to Aave protocol. Although he may lose a lot of money, his mark could leave decentralized lending protocol Aave in shambles.
Why could Aave go insolvent?
By the short squeeze and possible liquidation of the ponzi shorters position, Aave has to pay back all the bad debt – CRV he borrowed but couldn’t repay. Due to only 30m CRV on chain and a position of 92M that has to be repaid, Aave will have to use most of the funds of its own safety module to cover this loss.
In the case of a shortfall event, the safety module fund acts as a buyer of last resort and protects the protocol against unexpected losses.
This FUD could trigger more and more Aave users to withdraw their funds and thereby accelerate the spiral to insolvency. Another insolvency case, but this time in decentralized finance – DeFi.
Traders, however, can attempt to take advantage of this volatile nature by short selling Aave – AAVE. However, short selling is not for beginners and can be risky.
Can Aave – AAVE Be Shorted?
Yes. You can short Aave – AAVE price by betting against it using derivatives. However, you have to know the risks associated with shorting especially when using leverage.
Where can I short Aave – AAVE?
You can short Aave – AAVE on a futures market on ByBit. This is a market where you buy/sell a contract, which specifies when and at what price the token will be sold.
If you sell this futures contract, you bet on a decline in price of Aave – AAVE. Learn more about futures markets here.