The liquidity pool of DeFi project Mycelium has been exploited by the arbitrage bot, which has exploited the price mismatch issue.
Mycelium, a multi-product Web3 ecosystem, announced that one of its liquidity pools suffered losses due to price flow issues. Also, the IP address of the protocol is blocked by the Binance API module.
Mycelium ETH/USD Pool Exploited
According to a statement from the Mycelium team, on January 7, 2023, the platform was exploited by an arbitrage bot. The bot detected a discrepancy in the Ethereum (ETH) price on the platform (too high spread) and started abusing it with a large amount of liquidity.
The discrepancy was attributed to the Bitfinex API, which started posting highly volatile prices for the ETH/USDT pair. Meanwhile, other price feed provider Binance was down for blocking the US associated IP used by Mycelium.
The team want to address the situation occurring around the ETH-USD price feed that impacted MLP.
It appears that an issue developed overnight via 1 of the 3 data providers. While another data provider was down due to IP blocking. Causing a discrepancy in median price.
1/7
— Mycelium (@mycelium_xyz) January 7, 2023
Therefore, the system was unable to rebalance the price through an independent price feed. The Mycelium team emphasizes that as a result of the Binance outage, Mycelium only uses data from Bitfinex and Coinbase, and this outage is not widely reported.
When the problem was identified, the team launched an internal investigation and stopped trading. Postmortem states that the pool has been unavailable for a total of 2.5 hours.
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