Curve Finance’s new L2 pools fail to boost TVL: Here’s why

  • On 30 August, Curve Finance launched three dynamic liquidity pools on Base.
  • However, its TVL has continued to decline. 

As part of its attempt to pull in new liquidity, decentralized exchange (DEX) for stablecoins Curve Finance [CRV] launched new pools on the Layer-2 (L2) platform Base on 30 August. However, the protocol’s total value locked (TVL) has continued to drop since then.

Is your portfolio green? Check out the CRV Profit Calculator

The drop in TVL is likely due to the ongoing capital flight from Curve since its reentrancy hack on 30 July. In that hack, an attacker exploited a vulnerability in Curve’s code to steal about $73.5 million worth of crypto assets.

The hack shook confidence in Curve, as many users have since withdrawn their funds from the platform. Since the hack, Curve’s TVL has dropped by 31%. 

As of this writing, assets worth $2.65 billion were locked in Curve, with Base contributing less than 1%. Only $15 million in liquidity has been supplied to the three dynamic liquidity pools on Base since their launch, according to DefiLlama data. 

These pools include 3c (USDbC, axlUSDC, and crvUSD), cbeth (ETH and cbETH), and tricrypto (crvUSD, tBTC, and ETH). 

CRV decline remains consistent, but there is a catch

At press time, CRV exchanged hands at $0.4406. Impacted by the hack, the alt’s price has declined by 22% in the last month, data from CoinMarketCap revealed. 

In the wake of the hack, many feared that Curve founder Michael Egorov’s collaterals on Aave were at risk of liquidation, thus putting their CRV investments in harm’s way. On-chain liquidity for CRV thinned out shortly after the hack, and the token’s price has since plummeted as investors have increasingly “dumped their bags.”

An on-chain assessment of the demand for the alt in the last month revealed a significant decrease in the count of daily active addresses involved in CRV trades and the count of new addresses created to trade the alt.

Curve on Arbitrum CRV 07.41.14 02 Sep 2023

Source: Santiment

On a daily chart, key momentum indicators trended downward. This confirmed the fall in CRV accumulation since the 30 July exploit. For example, CRV’s Relative Strength Index (RSI) rested at 27.43, and its Money Flow Index (MFI), also positioned beneath its center line, was 48. 61.

Likewise, the alt’s On-Balance-Volume (OBV) plunged by 14% in the last month. When an asset’s OBV declines in this manner, it means that the volume of selling has outweighed the buying. 

Read Curve Finance’s [CRV] Price Prediction 2023-24

However, while CRV’s price declined, its Chaikin Money Flow (CMF) embarked on an uptrend on 24 August, creating a bullish divergence. This indicator measures the amount of money flowing into or out of an asset over a period of time.

A CMF bullish divergence occurs when the buying pressure for an asset is increasing even while its price continues to dawdle. It often acts as a precursor to a price rally. Should sentiment improve, CRV’s price is expected to experience a rebound. 

CRVUSDT 2023 09 02 07 33 47

Source: CRV/USD, TradingView

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