Expert take: Here’s why CRV rallied 500% to 22-month highs
Release: 2024/12/09 16:54 Reading: 909
Upsurge in Curve DAO Token: CRV Rallies with Game-Changing Innovations
The Curve DAO (CRV) token has witnessed remarkable growth since the beginning of December, establishing itself as one of the leading gainers in recent months.
CRV soared by an impressive 500% in 30 days, peaking at $1.33 with a market capitalization of $1.6 billion on December 7th. This marked its highest level since February 2023. While it has experienced a 7% correction over the past 24 hours due to overbought conditions, CRV remains strong at $1.1.
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Despite the correction, CRV's daily trading volume has surged by 20% to $635 million, indicating sustained investor interest. Its open interest has also reached an all-time high of $262 million, according to analysts at CEX.IO.
"This surge can be attributed to the launch of Savings crvUSD (scrvUSD) a month ago," said Illia Otychenko, lead analyst at CEX.IO. Curve Finance, a decentralized exchange and automated market maker, allows trading in Ethereum-based stablecoins and altcoins.
In early November, the decentralized autonomous organization (DAO) approved the creation of scrvUSD, a yield-bearing stablecoin that enables users to earn rewards simply by holding it. This stablecoin is designed to "scale crvUSD" and compete with rivals like Sky's sDAI and Ethena's sUSDe.
scrvUSD also offers users additional revenue streams through Curve Finance's lending and staking strategies. Currently, it provides an annual percentage rate of 13%. The stablecoin has already accumulated a market cap of $20 million.
Despite scrvUSD's aim to stabilize crvUSD interest rates, they have experienced volatility due to high leverage demand. Following the recent U.S. elections, borrowing rates spiked to 50% on key markets.
"Higher interest rates generate more revenue for Curve per operation, but they also limit new borrows," explained Otychenko. "To counter this, Curve DAO increased scrvUSD holders' revenue share from 10% to 20% and adjusted the crvUSD yield mechanism, successfully reducing borrowing rates to 20% and boosting scrvUSD deposits."
The launch of scrvUSD has fueled demand for CRV, with its Relative Strength Index (RSI) rising above 75 on December 4th, indicating overbought conditions.
"On the weekly chart, the RSI suggests that a pause is likely before further upward movement," added Otychenko.
Analysts anticipate a long-term surge for CRV due to its expanding ecosystem. However, it may experience a "notable" correction before embarking on another rally.
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