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The ongoing rally of the CRV price might be linked to a publicized short bet on the token.
After falling nearly 25% earlier on Tuesday morning, the price of the Curve DAO token (CRV) retraced its step, rallying over 50% in the process. As shown by CoinGecko data, CRV quickly fell from $0.53 to $0.40, hitting its lowest mark in two years. But shortly after the fall, the token also went on a long rally, gaining more than 50% to hit $0.61.
As of publication, CRV was seen trading at $0.63 on CoinGecko, posting a 28.7% gain in the last 24 hours.
Why Curve (CRV) Price Is Rallying
It appears that the ongoing rally might be linked to a publicized short bet on the token. Recently, a trader took a major short position by borrowing a whopping 92 million CRV from lending protocol Aave. While the said trader pledged $57 million in USDC as collateral, he reportedly went on a selling spree initially. That might explain why there was a fall in the price earlier in the day.
Meanwhile, for the short seller, the price recovery may have brought about the danger of liquidation. According to data from the trader’s profile on portfolio tracker DeBank, the Aave loan is no more healthy. This is so because, when the value of borrowed tokens against that of the pledged collateral falls below 1, it is expected that debt positions go into liquidation. Unfortunately, this is the current situation as CRV has already risen above $0.63 as of press time.
Premeditated Move to Pump?
If the short seller wanted to avoid liquidation, a safety measure would have been to post more collateral on Aave. But they did not. So experts such as one identified as KamikazETH on Twitter believe there was a plot by whales to pump the price of CRV all along. He wrote partly in one of the threads:
“I think it’s a massive short on $CRV that will be followed by the mother of all squeezes upward when the AAVE liquidation detonates.”
Curve saw massive outflows between November 8 and 13 as FTX’s crash injected an air of uncertainty into the markets. The total value locked in Curve has declined to $3.6 billion, the lowest since February 2021.