Curve’s Soft Liquidations Give Borrowers a Chance to Recover

Curve Finance is highlighting how its lending model can keep distressed positions alive well after they enter liquidation territory.

Data from Curve’s lending markets recorded 704 soft-liquidation events across 602 borrower addresses. The median position remained in the liquidation zone for 14.5 days, while 25% of the cases lasted at least 38.9 days. Some positions stayed there for months. Of the total events, 476 started during the first half of 2026.

The figures show that liquidation on Curve does not necessarily result in an immediate loan closure.

A Different Approach to Liquidation

Most DeFi lending protocols rely on a predetermined liquidation threshold. When the value of a borrower’s collateral drops below that level, part of the collateral is sold to repay the outstanding loan.

That process can permanently reduce the borrower’s position. If prices recover afterward, assets that were already sold generally do not return to the borrower.

Curve’s LLAMMA system takes a more gradual approach by using a liquidation range instead of a single trigger price.

As collateral moves downward through the range, LLAMMA progressively converts portions of it into the asset borrowed. Rather than immediately closing the loan, the system allows the position to remain active during the process.

If the collateral later recovers, some of those conversions can reverse, potentially allowing the borrower to regain part of the original position.

Borrowers Can Remain in the Liquidation Zone

Curve’s soft liquidation is not simply a grace period before a forced sale. The protocol can actively convert collateral while the loan remains open.

That means borrowers can spend days or weeks in a partially liquidated state and still have an opportunity to recover if market prices reverse.

This differs from the more conventional model used by protocols such as Aave and Compound, where collateral sold during liquidation is generally gone even if the market subsequently rebounds.

Curve is a major decentralized finance trading and lending platform known for stablecoin swaps and its crvUSD markets. According to DeFiLlama, the protocol has about $1.35 billion in deposits, while its decentralized exchange processed approximately $3.4 billion in volume over the past 30 days.

During the same period, Curve generated roughly $4.3 million in fees and $1.15 million in protocol revenue. Its lending markets had around $46 million in active loans outstanding.

Soft Liquidation Still Comes With Costs

Curve’s system does not completely shield borrowers from losses.

Positions can incur trading fees, collateral conversion costs, rebalancing expenses and interest while moving through the liquidation range. Repeated movements in and out of the range can add further costs.

A recovery is also not guaranteed. If the market continues to decline, a position can eventually reach hard liquidation. Even when prices rebound, the borrower may still end up with less collateral than they initially held.

The data therefore illustrates a key feature of Curve’s lending model: entering liquidation does not necessarily mean the loan is finished. Instead, borrowers can remain partially liquidated for extended periods, giving their positions a chance to recover if market conditions turn favorable.