Llama and Gauntlet Propose Covering $1.6M in Aave Bad Debt

Llama and Gauntlet to Cover Aave Debt

The plan suggests paying the debt with money from the treasury of Aave and the Gauntlet bankruptcy fund. The 4,923 staked Aave tokens worth $283,000 are held by Gauntlet's bankruptcy fund. The plan also said that the DeFi lender's treasury, valued at $165 million according to Llama's most recent financial statement, can be utilized to pay down the extra debt.

Due to a well-reported short on Curve DAO (CRV) tokens, Aave accrued debt. The CRV price first dropped when the token fell to a two-year low of $0.40 after one trader acquired 92 million CRV worth $57 million on the DeFi lending platform and continued to sell them continually. However, as the price of the CRV token surged beyond $0.60, the short seller felt a squeeze.

Aave Treasury Has Low-Value Assets

Following the liquidation of the short seller's debt position on Ave, as a result of the squeeze, the DeFi protocol was left with a debt of $1.6 million. According to the concept, the Aave DAO treasury might be optimized through the debt coverage procedure. The plan said that Aave's treasury has a significant quantity of low-value long-tail assets. The assets may be used to restructure Aave's system and, as a result, complete the CRV market.

The suggestion will be discussed in the upcoming days by the Aave DAO community. If the DAO approves the proposal, Gauntlet and Llama will detail the debt repayment procedure.