Curve’s Soft Liquidations Help Borrowers Ride Out Market Crashes

Curve’s Soft Liquidations Give DeFi Borrowers More Time to Recover

Data from lending platform Curve shows that 704 soft-liquidation events had a median duration of 14.5 days, illustrating how some DeFi borrowers can remain in a liquidation state for weeks without their positions being fully closed.

Hundreds of loans on Curve Finance have entered liquidation territory and remained there for extended periods, according to data from the protocol’s lending markets.

The findings highlight an important difference in how Curve defines liquidation. On many lending platforms, once collateral falls below a predetermined threshold, assets are immediately sold to repay the outstanding debt. Curve instead uses the amount of time a position remains in its so-called “danger zone” to determine how collateral is gradually converted and whether the borrower can eventually recover.

Data shared with CoinDesk recorded 704 soft-liquidation events involving 602 separate borrower addresses. The median liquidation period was 14.5 days, while 25% of the cases lasted at least 38.9 days. Some positions remained within the liquidation range for several months. Of the total, 476 events started during the first six months of 2026.

Curve Takes a Different Approach to Liquidation

Traditional lending protocols generally follow a simpler process. A borrower deposits ether or another cryptocurrency as collateral, and if its value drops below a specified level, some of the collateral is sold to cover the loan.

On platforms such as Aave and Compound, collateral sold during liquidation is permanently removed from the borrower’s position. Even if the asset price later rebounds, the borrower does not automatically recover the amount that was sold.

Curve takes a different approach through its LLAMMA lending system. Rather than relying on one liquidation threshold, LLAMMA uses a range. As the collateral price moves downward through that range, the system progressively converts portions of the collateral into the asset used for borrowing instead of immediately closing the loan.

If the market reverses and the collateral price rises again before the position reaches full liquidation, some or potentially all of those conversions can be reversed.

Borrowers Can Remain Partly Liquidated

One of the notable findings is that these positions were not simply receiving extra time before liquidation. Their collateral was actively being converted while the loans remained open.

As a result, a borrower could spend days or even weeks in a partially liquidated state while still having an opportunity to recover if market conditions improved.

Curve Finance is a major decentralized finance trading and lending protocol, particularly known for stablecoin swaps and its crvUSD lending markets. According to DeFiLlama, the protocol holds approximately $1.35 billion in deposits, while its decentralized exchange handled about $3.4 billion in trading volume during the previous 30 days.

Over the same period, Curve generated approximately $4.3 million in fees and $1.15 million in protocol revenue. Active loans totaled roughly $46 million.

Soft Liquidation Still Carries Costs

The ability to avoid an immediate full liquidation does not mean borrowers escape losses.

Curve’s soft-liquidation mechanism can still expose borrowers to trading fees, collateral conversions, rebalancing costs, interest expenses and repeated market movements. A position that moves back and forth through the liquidation range can therefore accumulate additional losses over time.

Borrowers can also still face a hard liquidation if the market continues moving against their positions. Even when prices eventually recover, the borrower may have less collateral remaining than they had before entering the liquidation zone.

Curve’s data therefore illustrates a key difference in DeFi lending: entering liquidation territory does not necessarily mean a loan has been permanently closed. Under Curve’s system, hundreds of borrowers have remained in that state for days or weeks while retaining the possibility of recovering as market conditions changed.

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