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# On the Brink of Another Market Contagion
- URL: https://www.metatalks.ai/on-the-brink-of-another-market-contagion/
- Published: 2023-08-04T18:55:49.000Z
- Updated: 2023-08-04T18:55:49.000Z
- Author: Katelyn Chow
- Tags: binance, bnb, defi, curve, altcoin, crypto, cryptocurrency, lawsuit, regulation

U.S. Department of Justice officials are considering fraud charges against [@Binance](https://twitter.com/binance?ref=metatalks.ai). Still, they are cautious about the potential consequences, fearing it could trigger an FTX-like run on the exchange, potentially causing customer losses and cryptocurrency market panic, – [wrote Semafor](https://www.semafor.com/article/08/02/2023/us-prosecutors-worry-binance-charges-could-cause-run-on-exchange?ref=metatalks.ai) on Wednesday, citing the sources familiar with the matter.

The price of the [$BNB](https://twitter.com/search?q=%24BNB&ref=metatalks.ai) token [immediately fell](https://www.coindesk.com/business/2023/08/02/binance-could-face-us-fraud-charges-but-prosecutors-worry-about-risk-of-bank-run-semafor/?ref=metatalks.ai) following the report but has not yet broken out of [that consolidation phase](https://www.metatalks.ai/it-could-get-really-ugly-for-binance-coin-bnb-chartists-said/). However, on higher timeframes, it appears to be on the verge of a potential breakdown.

![](https://lh4.googleusercontent.com/aPtI4eJFvvHdMnrOvOERI3CTqLl6Ao7m30FEKxBCa9QQDVtxDLIovxnkYgg2_n96NRK8F_OIgflXuaWSDUVL6phs8ChwZ2vjXvrH3laRExvtCpsRe8OSKSYH0gJuzU63WQjTbOKk4S9ORiWMs31CYwfSuJBR6kv4)

Officials around the world have been [investigating](https://www.metatalks.ai/whats-difference-between-coinbase-and-binance-sec-lawsuits/) Binance publicly, and the CFTC previously [sued the company](https://www.metatalks.ai/cftcs-lawsuit-against-binance-may-be-a-big-deal-but-crypto-market-as-a-whole-looks-like-just-consolidating/) and its CEO, [CZ](https://twitter.com/cz%5Fbinance?ref=metatalks.ai), for “willful evasion” of U.S. laws. However, the collapse of FTX last year and the history of failed firms in traditional finance raise concerns about the risk of targeting “[systemically important](https://coinmarketcap.com/rankings/exchanges/?ref=metatalks.ai)” institutions like Binance.

![](https://lh5.googleusercontent.com/CBdVB3-dQjiQa0HQpCeWWm9ddtWEmTf0Hskc55YZ4aKQoW9Y5LoJDhE4rOl8nD9fI3hIswGMpZUGP0fhfbfZogr0agsBFyWAhnjotS7d_PRElDEKmjJZjnk4xMY3a1nLBNjyaMDstoiR3sUS1wgeCHhIhNzA_fmt)

“But wait, we’ve got DeFi!” they said.

Yes, we do. And speaking about DeFi…

![](https://lh5.googleusercontent.com/4nxYEASHgpc4LStk02vve1MTZR_9zpP8j5m7fhQiBqRUdccDJk-RW9e1iBDnIvV8vNIssB66wCU1mU6MHkH1vopnO3upKubnvivVlqLil0FZAgR6gT1oonMswE0D8KogJqPLYcdr1Qg-9U1LOhF0d7SMIW3sAtnx)

[Curve](https://twitter.com/CurveFinance?ref=metatalks.ai) liquidation risk after the last week’s [exploit](https://twitter.com/CertiK/status/1686433840674328578?ref=metatalks.ai) poses [a systemic threat](https://cointelegraph.com/news/curve-liquidation-risk-poses-systemic-threat-to-defi-even-as-founder-scurries-to-repay-loans?ref=metatalks.ai) to DeFi, and the founder’s [efforts to repay loans](https://cointelegraph.com/news/curve-founder-michael-egorov-crv-loan-counterparties?ref=metatalks.ai) may not be enough to mitigate the potential consequences: a cascade of liquidations in high-profile loan portfolios. So yes, it’s not your ordinary weekly DeFi exploit.

![](https://lh6.googleusercontent.com/NhDvLYHiJAzo8A43-kYh06OJ1s-Ol9qd-Kg1g0nDjSZ0356BH_1lqDYJ91OnAbwjInYTO7XLa9TzIHNnVHHwoLSnVv7fhIbIS6Pzy5ZlafgX3DbaCFiELPmnpK9FqevluYumiIMqn7T5OQLfbCVdnzZvAJw_w1xU)

Numerous insightful [reports](https://blog.chainalysis.com/reports/curve-finance-liquidity-pool-hack/?ref=metatalks.ai) and [studies](https://research.kaiko.com/insights/curve-finance?ref=metatalks.ai) have been published on this subject, which may seem overwhelming even. But, to simplify the initial DYOR steps and add a somewhat emotional tone for further exploration, I’d suggest to start with [this thread](https://twitter.com/AutismCapital/status/1686251750632854?ref=metatalks.ai):

![](https://lh4.googleusercontent.com/ItFzFtsDavHpgKnF1EKngd8S5gCXZAur6ZjDS-dDsHKHgcRdHxNft2lMUI75xtk28fmSEHRA6LLEKqqwi_0qELbhaw2VBSPo5_Nbpk2YCUgkiv4PvkwNIbaPGpxfgw2TFP68bgDsu-2cBhAyp108lcOf1pr8m_Ik)

[Certik](https://twitter.com/CertiK/status/1686433840674328578?ref=metatalks.ai), [Rekt](https://rekt.news/curve-vyper-rekt/?ref=metatalks.ai), and [Llama Risk](https://hackmd.io/@LlamaRisk/BJzSKHNjn?ref=metatalks.ai) have provided a detailed breakdown of the technical aspects of the exploit. Chainalysis [shared](https://blog.chainalysis.com/reports/curve-finance-liquidity-pool-hack/?ref=metatalks.ai) their blockchain analysis on this, too.

But on the very basic level, this is primarily a story about [reckless leverage](https://twitter.com/blockworksres/status/1686818314822275072?ref=metatalks.ai), [liquidity](https://twitter.com/OlimpioCrypto/status/1686129328659316738?ref=metatalks.ai), and [solvency](https://twitter.com/OlimpioCrypto/status/1686854817841545216?ref=metatalks.ai), again, which is perfectly illustrated in the threads on the links.

![](https://lh4.googleusercontent.com/py2V0Y2pvEtFIXQxP1c7ZMG_n9zFxD6fpXvDbFE4LaTuyg9dNpRTwtWrDXPB6qxZ96aN0ed8dOPv6FPRA7CySrUyoSMyHdrssOSwYtm5A5IciXviaX1BUEdkJBK8XdtnOkehpCV36h0b_tWf-7qQjaA-JlCEq4wP)

*(*[*Thread*](https://twitter.com/OlimpioCrypto/status/1686129328659316738?ref=metatalks.ai)*)*

Now the Curve founder Michael Egorov [is attempting](https://cointelegraph.com/news/curve-founder-michael-egorov-crv-loan-counterparties?ref=metatalks.ai) to pay off his [reckless mountain of DeFi debts](https://twitter.com/AutismCapital/status/1686251750632854?ref=metatalks.ai) by selling CRV on [OTC](https://www.investopedia.com/terms/o/otc.asp?ref=metatalks.ai) markets at a discount. He sold CRV tokens for $2 mln [to Aave founder](https://cointelegraph.com/news/curve-aave-chan-founder-proposes-buying-2-m-crv-from-curve-founder?ref=metatalks.ai), for $4 million [to Huobi’s Jun Du](https://cointelegraph.com/news/curve-huobi-s-jun-du-acquires-10-million-crv-tokens-to-support-curve?ref=metatalks.ai), [made a deal](https://coinedition.com/tron-founder-steps-in-to-save-defi-platform-after-47-million-exploit/?ref=metatalks.ai) with Tron founder Justin Sun, etc.

![](https://lh6.googleusercontent.com/tELTQdXJMfmS1dGZSDu0VljLr_ci_a6Ab9yVbAR99cHfZ4VGSQpISjFkJGJoaDEd3EPK4jOBnGcC1gZn1J7TFV8diiDD5TiQB7tPQJPtLwO-XikWRfV8jgr1NRuFobFBP0FDeUGnafGKNF1NfJEHN3FC-Tha8dVa)

![](https://lh4.googleusercontent.com/XrJVuzBU3-1b9S-Z3Jx2ZffW2pCQvu4DZbgfc4CK_Ar9pc1J4Fw7rHiMScLiRlMzS5KEq5_fU-w4hozWDtnbrMdynGYVGSHNEzHeoqTpTYwbQCL8_42OcsWcJlW0-EDfUBB_ibJJ1J5lPJD97TJnYDpiuv5_2c7W)

As of Thursday, Michael Egorov [has sold 72 million CRV tokens](https://www.theblock.co/post/243056/michael-egorov-has-so-far-sold-72-million-crv-tokens-in-otc-deals?ref=metatalks.ai) in OTC deals in exchange for $28 million (out of $60+ mln), [according to @lookonchain](https://twitter.com/lookonchain/status/1687115628006772737?ref=metatalks.ai).

![](https://lh5.googleusercontent.com/CM6TTLvT7R6r2IaeFX1W2Y8IiP4Y6e248tXQnBzuSMqaBldOLCHpOULWGLGlr30bE7i9TbcOGb1108pWKxNsmnjbGVrtdfwREPuXJYg0LejNIZtkr6y3h2IFm_4SHuk6Io9luVHYyOCa_Eg13LQtQvWx7iDrV9Lh)

*(*[*@\_Checkmatey\_*](https://twitter.com/%5FCheckmatey%5F/status/1686256581338714112?ref=metatalks.ai) *of* [*@Glassnode*](https://twitter.com/glassnode?ref=metatalks.ai)*)*

Talking about the crypto market reaction as a whole,

![](https://lh6.googleusercontent.com/9jOEbeFdX9Jl8mFj0RGHGbeVjuccXNcZGTfb70RvmaK7HX0lKCYqYOq9kF-aYafk_46HS25M7NOUD3Ff_JcU5pgNj3o0Z-0i_iiBC-ZLjB6fx3g_qVzlYn6qlJcRDrXnx560vvYlRt7Dl1wj53FCV2-KzqlnnARe)

Yay. But:

![](https://lh5.googleusercontent.com/hYYEoiTh2m7ZU9MRh_gYqMHwf2BlNX0_13zZtmwVzUZ4PgPxVJzRau9KbRQut99GP0zwnPgigPCzoOl3X7zeORspzo_fwsDO4Vzn9sy_BfRfKzRX1r2vf1xP_bC_qcrChJ25VYIfmhDRiYqibTO0_7L4o63W5Ehz)

From the technical perspective, many see this situation as a “make or break” moment for BTC (and hence for broader crypto):

![](https://lh5.googleusercontent.com/Nqn4gREBtm0JWYVZamCKi4hyy-3YS1lb8ZySSFEOnuv5wldz56qWbPbg93KZOIVa7-cp6tGG6i77jjhfqd4JzJklFK8g4GZbdMIggOt-CejJABixVyHW6E4E1sW613lizC_UTJkgFT5CrOmzg-UeqTmzl8gAnrzY)

![](https://lh3.googleusercontent.com/KtPO86-vn9EYcke2_kxeGPfC558TFnXBwAKQeag_NwcFNZ7rFf3_6YzISV7RwcOGiFUgsL4zndaBU6IxuHQhSejeAN8_qoiYjjfp3HQBAwl6kvwf7zrKxHb39b3AgxzbY_PTsv8ROLv5K4SoO3xpUZcfbKzdThBj)

Regarding some fundamentals and long-term perspective, this time, I’d refer to the David Puell’s of Ark Capital monthly report ([thread](https://twitter.com/dpuellARK/status/1687271110335705088?ref=metatalks.ai)):

![](https://lh5.googleusercontent.com/FsNgkSr4bvHOaWyKQbyaPvi0Y1PNUc9-9L2HNge6n55e0134n8VX3JfnXn1lMhpskCLeO9_vQR4oOyeMhPAwJJS25o3vI0eU7qOBTTBVMFKduoOyaTsjnSJWA6yp9hRT5BwYPMHxorb2gnzDsmheOs8K4LBxsBq6)

Almost all analysts also highlight that BTC’s realized volatility is now at multi-year lows ([more stable than gold and stocks](https://www.coindesk.com/markets/2023/08/01/bitcoin-has-been-more-stable-than-gold-and-stocks-violent-price-action-could-ensue/?ref=metatalks.ai) even), suggesting a decisive move is approaching with every passing day.

![](https://lh3.googleusercontent.com/DHFTpOs6g2rjfCF_-FAUTwB22zUnRY8X2whshFNfzO0vD1eeEIB2NBUvo2qvvBBMoOpuzbYN4v5MblP3zHNzvs82mTKpnEenDHlqueJIhwDwhCNYAioFhUkOT0v9einjtiGOaHBNcCUA46zupPTCuq8zIzV_U7nL)

While Alex Krüger, economist and trader, [notes](https://twitter.com/krugermacro/status/1686140277428482048?ref=metatalks.ai) that statistically, the most recurrent outcome from periods of such low volatility has been upward movement.

![](https://lh4.googleusercontent.com/UnLxXp8HdS1XhijXYKybfKm89wxD-gGTkiu8FWn2tbmSftLEDcat1atNh696LVptDvpSgd8nY_aHD0JG08Wln9L9WKwhrAyCAQSCuyCnWqG6VnoUoZfjzYAjzH5tGmqSTuMTPnT-PNmS-fgeYfkYDgs-Mqc7pQIw)