Curve's Soft Liquidation Mechanism Allows Hundreds of Loans to Remain in Liquidation for Weeks

ME News reports that, as of September 8 (UTC+8), Curve Finance’s data shows its lending market recorded 704 “soft liquidation” events involving 602 borrower addresses, with a median duration of 14.5 days; a quarter lasted at least 38.9 days, and some positions remained in the liquidation range for months. Of these soft liquidations, 476 began in the first half of 2026. Unlike traditional lending protocols such as Aave and Compound, Curve’s LLAMMA system does not sell collateral in a single transaction once the price falls below a threshold; instead, it gradually converts collateral into the borrowed asset within a defined price range. If the price recovers before the loan fully fails, some or all of the conversion can be reversed. This means borrowers are not in a grace period—collateral is partially liquidated throughout the loan’s life—but they retain the opportunity to recover their position if prices reverse. However, soft liquidations are not without cost: data shows borrowers may still incur losses from transaction fees, conversions, rebalancing, interest, and bidirectional price volatility; if market conditions remain unfavorable, positions can still fall into hard liquidation. Curve Finance is a leading DeFi protocol focused on stablecoin swaps and crvUSD lending, currently holding approximately $1.35 billion in deposits, with a DEX trading volume of about $3.4 billion over the past 30 days and around $46 million in active loans. (Source: ChainCatcher)