Abracadabra Finance Proposes Exponential Interest Rates to Mitigate CRV Liquidity Risk

Proposal to Raise Interest Rates on CRV Loan to Reduce Risk

Abracadabra Finance has proposed an aggressive measure to protect against the risks associated with a massive loan taken against CRV tokens. The proposal suggests raising interest rates on the loan exponentially in order to liquidate the position and reduce exposure. Currently, Curve Finance founder Michael Egarov has borrowed $18 million at a rate of 18%, but the proposal aims to increase this to 200%. The interest rate would gradually decrease as the loan is repaid, with the expectation that it will be fully covered within six months. All proceeds from this strategy would go to Abracadabra’s treasury to reduce the DAO risk associated with CRV’s liquidity conditions.

Key Points:
– Proposal to raise interest rates on CRV loan to liquidate the position and reduce exposure
– Michael Egarov has borrowed $18 million and the proposed rate is 200%
– Gradual interest rate decrease as the loan is repaid
– Loan expected to be fully covered within six months
– All proceeds will go to Abracadabra’s treasury to reduce risk

The Abracadabra community has shown overwhelming support for the proposal, with 99.95% voting in favor. Concerns were raised earlier about the protocol’s profitability and asymmetric downside risk. Liquidating the CRV position could have significant negative impacts on the Abracadabra protocol and the wider DeFi ecosystem. By implementing this strategy, Abracadabra aims to minimize these risks and protect its treasury.

Hot Take

Abracadabra Finance’s proposal to raise interest rates on the CRV loan is a bold move to reduce risk and protect its treasury. By gradually increasing the interest rate and using the proceeds to repay the loan, the protocol aims to minimize negative externalities associated with such positions. The overwhelming support from the Abracadabra community indicates a strong belief in this strategy. However, it remains to be seen how this aggressive measure will impact the broader DeFi ecosystem and the stability of CRV as a trading pair.