Curve's CRV Token Becomes Volatile as Exchange Account Balances Hit All-Time Highs

Key points: 

• According to data tracked by Glassnode, the amount of CRV held in centralized exchange wallets has surged 70% this month to a record 148.9 million, a 46% increase in the past 24 hours alone.
• In other words, the number of CRV available for liquidation on centralized exchanges has increased significantly.
• Investors recently borrowed 20 million CRV from DeFi lending giant Aave and transferred half of it to OKEx, potentially selling the cryptocurrency.
• The near-term outlook for CRV looks bleak, as the increase in exchange balances is accompanied by a lack of incentive to hold tokens or provide liquidity on Curve.

As the governance token of the decentralized trading curve, CRV fluctuates with the surge in the holdings of centralized trading platforms.

The token fell as much as 17% to a two-year low of 40 cents in early trading on Tuesday before recovering in a V-shaped recovery. At press time, the token was back in positive territory on the day, changing hands at 53 cents.

According to data tracked by Glassnode, the amount of CRV held in centralized exchange wallets has surged 70% this month to a record 148.9 million, a 46% increase in the past 24 hours alone.

In other words, the number of CRV available for liquidation on centralized exchanges has increased significantly. When an investor intends to sell a position, they usually transfer coins from their wallet to an exchange.

The development of the CRV market is noteworthy as Curve, which specializes in stablecoin swaps, is the largest source of liquidity in decentralized finance (DeFi). That means any issues with the Curve could have broader ramifications for the market.

CRV’s exchange balance skyrocketed following reports that a major investor moved a large amount of borrowed tokens to a centralized exchange.

According to several Twitter-based researchers, including Lookonchain, the investor recently borrowed 20 million CRV from DeFi lending giant Aave and transferred half of it to OKEx, potentially selling the cryptocurrency. According to Glassnode data, OKEx balance increased by 11.3 million this month.

The latest issue of the Curve newsletter dubbed the activity "The Big Short."

The near-term outlook for CRV looks bleak, as the increase in exchange balances is accompanied by a lack of incentive to hold tokens or provide liquidity on Curve.

"While Curve was initially a winner after FTX, the lack of user engagement now hurts them in the short-term," said Markus Thielen, head of research and strategy at crypto services provider Matrixport, pointing to this month's crypto crash on exchange FTX. "Users have less interest in injecting their tokens into liquidity pools or even locking in total locked value.”

“Genesis and DCG raise the risk of a bailout of individual tokens,” Thielen added, referring to Genesis Global Trading and its parent company Digital Currency Group. Genesis is facing liquidity issues.

Between November 8th and 13th, Curve saw massive outflows due to the volatility and uncertainty brought about by the bankruptcy of FTX. The total value locked on Curve has fallen to $3.78 billion, the lowest level since February 2021.