Author: DeFi Cheetah, crypto KOL; Translation: Golden Finance xiaozou

Within 1 month, CRV From $0.20 to $1.10, what happened?

Simply put, Curve Finance is becoming the gateway for institutions to enter DeFi. Due to the huge inflow of institutional capital, crvUSD is expected to grow exponentially.

BlackRock’s tokenized money market fund BUIDL (Tokenized U.S. Treasury Bonds) is a Problem: Due to regulatory requirements, BUIDL holders can initially only transfer their tokens to other pre-approved investors; meaning, they are completely separate from the DeFi space.

Elixir appears, and BUIDL holders can use sBUIDL to mint deUSD, that is, pledge BUIDL. What’s more, just like USDe, Elixir has chosen Curve Finance as its primary liquidity center for deUSD.

But why are these fund inflows related to the crvUSD business? Because a large part of this fund may be purchased and pledged to crvUSD to obtain a yield of approximately 15%, which comes from the interest income of crvUSD. Then another flywheel started...

Some background additions to help understand: These interest incomes come from the demand for leverage in the bull market, users on DeFi Saver Borrow crvUSD using BTC or ETH or other collateral. Once BUIDL holders and other tokenized US Treasury bond holders mint deUSD or other stablecoins supported on Curve Finance, they can very easily purchase crvUSD and stake it, earning a yield of approximately 15% without any lock-in period!

You may be thinking: If more people share the benefits, won't the benefits drop significantly? A miracle happens here: as more and more people buy and stake crvUSD, both interest income and TVL will increase exponentially! This is due to the flywheel effect of crvUSD.

As more and more people buy and stake crvUSD, the price of crvUSD rises above $1, and the price change causes PegKeeper to print more crvUSD. As PegKeeper debt accumulates, interest rates will fall. In a bull market, the demand for borrowing is huge, causing crvUSD to fall below $1 again. This pushes up the yield on crvUSD, and more people will buy crvUSD to earn income, thus lowering interest rates and once again encouraging more borrowing.

This flywheel contributes to the exponential growth of crvUSD. For more details on the impact on crvUSD interest rates, please read my tweet:

Facts Above, the current bottleneck of crvUSD is not borrowing demand, but buying pressure or use cases that can help digest the selling pressure brought by mortgage lending cycles/leverage. If crvUSD is always below $1, the interest rate is still too high and no one will join.

But BlackRock's BUIDL and Elixir illuminate the path for the crvUSD flywheel to finally take off: institutions enjoy the benefits brought by interest income, and the income needs of institutions give crvUSD Room for expansion. It’s a perfect win-win!