Large CRV Trade Left DeFi Lender With $1.6M Bad Debt Last Week
Aave, the leading DeFi money market protocol with over $5B in total value locked, has frozen multiple low-liquidity asset pools in a bid to protect against attacks like the one targeting Aave’s CRV pool that caused the protocol to incur $1.6M worth of bad debt last week.
On Nov. 23, a proposal was published to Aave’s governance forum advocating for freezing 17 v2 pools in the interests of caution due to their thin liquidity and the volatility of the underlying assets. The proposal attracted near-unanimous support.
On Nov. 27, the changes were executed, halting Aave v2’s YFI, CRV, ZRX, MANA, 1INCH, BAT, sUSD, ENJ, GUSD, AMPL, RAI, USDP, LUSD, xSUSHI, DPI, renFIL, and MKR pools.
Eisenberg’s CRV Trade
On Nov. 22, Avraham Eisenberg, the trader that exploited Mango Markets to the tune of $116M in October, sought to replicate his “profitable trading strategy” by borrowing millions worth of CRV from Aave’s illiquid pool to short-sell the token.
While Eisenberg’s trades appear to have backfired and resulted in a seven-figure loss for Eisenberg due to CRV quickly rebounding in price after Curve released the whitepaper for its upcoming stablecoin, the attack left the Aave protocol with $1.6M worth of bad debt.
While Aave said it has the funds available to cover the loss, the protocol is eager to avoid a repeat of the incident.
AAVE is down around 30% in the past month.
AAVE Price, Source: The Defiant Terminal