$CRV Whiplashed As Spot Shorter Attacked AAVE Loans; crvUSD Stablecoin Announced Amid Volatility, Introducing New Liquidation Mechanism; FTX Said Potential Asset Buyers Arise

23 Nov 2022, Wednesday

3:48 AM

$CRV Whiplashed As Spot Shorter Attacked AAVE Loans; crvUSD Stablecoin Announced Amid Volatility, Introducing New Liquidation Mechanism; FTX Said Potential Asset Buyers Arise



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Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)

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What We Are Covering Today

  • US equities advance higher after strong earnings report from retailers and indication of slower rate hikes from Fed officials (more in Macro & TradFi)
  • Curve releases stablecoin whitepaper; $CRV saw huge intraday swing as spot borrower on AAVE pushed prices lower before reversal (more in DeFi & CeFi)
  • FTX said that it was receiving interests from buyers on its assets
  • On-chain activity shows block investors remain confident in ETH (more in On-Chain)
  • Term structure normalized into contango; Overall options OI declines (more in Crypto Derivatives)
  • BTC and ETH rebound sharply after testing their previous lows (more in Crypto Technical Analysis)

Macro & TradFi

GM! Lockdowns across China have begun again amidst spikes in COVID cases. Cases have reached concerningly high levels last seen in April at 28,000 cases daily;China’s CSI 300 index had retreated more than 2.5% since last week.

Looking at US markets, the Dow Jones rose 1.18%, S&P500 rallied 1.36% and the NASDAQ closed higher by 1.36%. This comes after upbeat earnings from retailers and Fed officials supported the idea of moderating the size of future hikes. Elsewhere, the dollar and treasury yields have also eased due to the slight increase in risk assets, the dollar down 0.63% in the past 24 hours and 10Y Treasury yields down 7bps.

DeFi & CeFi

  • DeFi TVL is down -4.09% in the past 24 hours
  • Curve Finance releases stablecoin whitepaper on Github
  • Mango Markets exploiter’s CRV loan gets liquidated on AAVE
  • Binance partners with TopGoal, a Gamefi and Socialfi platform, to build a football metaverse
  • Skip Protocol, a Cosmos based MEV infrastructure provider, has launched on Evmos
  • Synapse launches on Canto
  • Privacy startup Nucleo closes $4M Bain Capital Crypto led funding round

Avraham Eisenberg, a trader responsible for the previous Mango Markets exploit, had caused mayhem in $CRV prices yesterday, causing the token to fall as much as 25% before recovering fully. Avraham had previously borrowed 40 million $CRV tokens from AAVE and sent them to a CEX, prompting rumors of him shorting $CRV and potentially pushing prices towards the level where CurveDAO’s $CRV collateral on AAVE would be liquidated (around $0.25). He stated that he was able to pull this off due to AAVE’s vulnerable looping system, which allowed him to borrow close to $50m $CRV using $40m of collateral by depositing borrowed tokens back as collaterals. In order to liquidate his positions, AAVE would likely have to sell significant amounts of tokens from the safety module to cover this bad debt. However as $CRV roared back after the release of crvUSD stablecoin whitepaper, Avraham’s AAVE collateral of $40M USDC was liquidated, leaving AAVE with approximately $1.6M in bad debt, an insignificant amount compared to their reserve holdings.

Curve Finance has officially released its stablecoin whitepaper, detailing the mechanics behind it. Curve's stablecoin will be powered by a Lending-Liquidating AMM Algorithm (LLAMMA), which will substitute liquidations with a special-purpose AMM. The core idea behind this is an AMM for continuous liquidation/deliquidiation, essentially a way of distributing liquidation across the collateral price curve instead of conducting one-off liquidations. Additionally, Curve’s stablecoin would also utilize an Automatic Stabiliser, similar to Frax's AMO (Automated Market Operations), which will help to maintain peg by minting more of the stablecoin if its price is above peg, and withdrawing and burning the stablecoin if its price goes below peg. crvUSD’s mechanism likely alleviates the liquidation barrier issue plaguing other CDPs, as there are unlikely any concentrated price levels where concentrated liquidation happens, smoothing out collateral assets’ volatility due to liquidation flow.


ETH Number of Addresses Holding 10k+ Coins just reached a 1-month high of 1,192 whereas ETH Number of Addresses Holding 1k+ Coins also reached a 1-month high of 6,513. This indicates that even though ETH has recently broken below $1100, large-sized investors are still interested in accumulating more ETH. Hence, signaling bullishness in ETH.

Crypto Derivatives

  • Funding rate remains negative on BTC and ETH
  • 30-day IV fell slightly for both BTC and ETH to 70.96% and 90.60%, respectively
  • 30-day 25d put skew eased for both BTC and ETH to -17.31% and -20.57%, respectively

For futures, total liquidations came in at $96M, with the majority coming from short liquidations at $57M.

On the options front, BTC and ETH IV continue to fall after topping out on Monday. Term structure normalized into contango on the front end, while relatively flat on the medium to longer term of the curve. Put skew eased further on both BTC and ETH.
On BTC, topside flows were seen with outright calls and call spreads heavily purchased on near-term to EOY expiries. Meanwhile, ETH flows were mixed as both outright puts and calls were purchased simultaneously on EOY expirations.

Lastly, open interest on options has been steadily declining since the onset of the FTX debacle, likely due to thinner liquidity and wider bid-asks as market makers seek to reduce risk exposure.

Crypto Technical Analysis

BTC is at $16,197 and has rebounded by 2.7% over the last 24 hours. Price has bounced off the level of support $15,900, after wicking to a low of $15,479 yesterday. On the H4, BTC has risen off the lows at $15,699 and is now moving towards the level of resistance at $16,355. This resistance level will have to be broken before any further upside is expected.

ETH is $1,107 and has also risen by 2.9% yesterday. Similarly, ETH has rebounded strongly in the past 24hrs. On the H4, ETH has bounced off its support level at $1,097, and is currently moving sideways within its range. The next price level to watch out for would be at $1,189, and should ETH reject this level again it is likely to retest the lower level of support at $1054.85.

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