Curve Finance Hit Record Volume as Investors Scrambled To Trade Out of MIM

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Curve Finance, an automated market maker and DeFi’s second-largest protocol, had a record-breaking day on Jan. 27 with $3.2B in volume, according to the project’s stats page.

When daily volume hit $2.8B, Curve’s Twitter account teased that the mark was an all-time high for the protocol.

Volume was primarily driven by Curve’s Magic Internet Money (MIM) pool which accounted for over $1B in volume, according to protocol statistics

The MIM pool dominated volume as users looked to trade out of the stablecoin in light of the news that Sifu, as he’s known in crypto, is actually Michael Patryn, the co-founder of QuadrigaCX, a controversial crypto exchange that lost its customers over $100M. 

Sifu was the chief financial officer of Frog Nation, a network of projects which include Abracadabra, which issues the MIM stablecoin to users against their crypto assets pledged as collateral. He was ousted following the revelations.

In addition to the day’s events, those who follow Curve closely believe that the project is well equipped to handle an extended bear market. When crypto prices fall, users generally trade into stablecoins and Curve provides a place to earn yields on such assets.

“Both in theory and in practice, Curve returns tend to go up when bears roar, pushing up its fundamental value,” the founder of the well-known Curve-focused newsletter Curve Market Cap, who goes by Gerrit, told The Defiant. “If you’re trying to make Curve sweat, you’ll have to try harder.”

Indeed, yields spiked on the day of chaos as users made trades in the MIM and UST pools, generating juicy fees for liquidity providers. 

DeFiMoon, another DeFi commentator with over 12,000 followers on Twitter also thinks Curve is going nowhere in a bear market, specifically saying that the Curve Wars, the battle for voting power over the protocol stemming from locked up CRV tokens, are as active as ever.

“Stablecoin liquidity is just as important in a bear market as it is in a bull market,” DeFiMoon told The Defiant. “The last Votium round saw almost as much participation as previous rounds, so controlling CRV votes is as important as ever.”

Curve Bribes

Votium is an application that accepts “bribes” from other protocols looking to get an edge in the Curve Wars, by incentivizing people to have their votes boost a certain LP pool. For example, in Votium’s latest round, Frax Finance ponied up $5.71M in its FXS token as an incentive for users to provide liquidity to the FRAX Curve Pool, according to Llama Airforce.   

CRV is touted as an asset with real cash flows. When locked up as veCRV, users receive half of the trading fees on the platform, boosted CRV rewards on liquidity provided, and more if locked up in the likes of Convex Finance, a derivative product of Curve that allows users to access boosted yields without having to lock up CRV tokens themselves.

DeFiMoon appears to think being a veCRV holder is a great place to be in a bear market, posting a GIF of a relaxed wakeboarder sipping what appears to be coffee as a metaphor for life holding the asset. 

Convex Drops

Convex Finance, a protocol built on top of Curve to help users maximize their CRV rewards, has seen its CVX token drop 10% to $27.09 in the past week despite Curve’s record volume. Convex is the largest holder of veCRV, with 47.11%, according to a dashboard provided by Curve.

Convex has made rapid inroads into the Curve Wars since its launch last April. A Dune Analytics query by Yearn Finance developer Banteg shows Convex eating into the share of veCRV holders.

The main reason for Convex’s dominance is the rewards offered to users who deposit their CRV tokens to the protocol (which Convex locks for the maximum of four years). Users receive a token called cvxCRV in return, which can be staked, giving its holder a performance fee from Convex and CVX rewards, in addition to the normal rewards for veCRV holders.

Frax Finance appears to be looking to take advantage of the depressed CVX price. Frax is already the biggest holder of CVX with 1.5M, according to the site DAO CVX Tracker. There’s a proposal live on the project’s snapshot to buy another $25M of CVX which closes on Feb. 1.

In all, despite a depressed CVX price, the Curve Wars appear to be alive and well, as DeFi users reevaluate their strategies given the potential for an extended crab or bear market in the face of proposed interest rate hikes by the US Federal Reserve.

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