Curve Finance: Here’s why investors should take CRV’s win with a pinch of salt

• The total value locked on Curve expanded swiftly to attain pre-FTX levels.
• Native token CRV’s price and market cap are at the risk of a pullback.

According to a report on DeFi blue chips by on-chain analytics firm OurNetwork, Curve Finance [CRV] remained the largest decentralized exchange (DEX) by total value locked (TVL), underlining that the protocol continued to be the top choice for liquidity providers.

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

The findings were corroborated by DeFiLlama, which showed a 34% TVL growth in the last month. After a vertical fall spurred by the FTX contagion, Curve’s TVL ascended steadily towards its pre-collapse levels.

Source: DeFiLlama

Why Curve is a big deal

Curve’s growth has aligned with the broader trend of increasing interest in DEXes after the FTX collapse, eroded investors’ confidence in centralized exchanges (CEXes). The daily trading on DEXes has doubled over the last one month, data from Dune Analytics showed.

Source: Dune Analytics

The growth of Curve could also be correlated to the launch of Djed [DJED], Cardano’s [ADA] over-collateralized stablecoin. Unlike other automatic market makers (AMM), Curve’s liquidity pools mainly consist of similarly behaving assets like stablecoins. The entry of one more stablecoin in the market might have given an impetus to Curve’s LPs. 

Additionally, Curve Finance has taken steps to enlarge its liquidity pool by adding more gauges to the platform. The net effect of all the aforementioned factors could have fueled Curve’s adoption. 

Market conditions could change

Though CRV trailed Uniswap [UNI] decisively in terms of market capitalization, it should be noted that the Market Cap/TVL ratio of the protocol was below 1 at press time, per data from CoinMarketCap. This indicated that the network was still undervalued and there was room for further growth. 

Source: Token Terminal

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The surge in market cap was powered by the bullish run of native token CRV, during which its price almost doubled. However, the rally halted on 19 January and since then price has moved in a range with the resistance at $1.1.

The Relative Strength Index (RSI) has descended from the overbought zone and consistently made lower-highs and lower-lows. This signaled that price could break to the downside from the range. The Awesome Oscillator (AO) was in red which supported the ideal of a pullback. 

Source: TradingView CRV/USD