The cryptocurrency market took a hit after the collapse of Silicon Valley Bank as some of the reserve deposits of USD Coin (USDC) issuer Circle were in this bank. During this tremor, traders became entangled as well, and a DeFi trader lost millions during an altcoin swap.
DeFi trader lost millions during altcoin swap
A DeFi trader exchanged 2 million USDC tokens for USDT and received only 0.05 USDT in return. So while the swap between two stablecoins with a $1 peg should have been one-to-one, the trader’s $2 million was gone. This interesting event, similar to the ‘fat finger’ event in the stock markets before, occurred on March 11, at the zenith of the recent market turmoil around USDC.
According to reports, the trader made the swap through a series of transactions that started with the conversion of 3Crv to USDC before replacing USDC with USDT. It is thought that this interesting event experienced by the unfortunate trader is caused by the panic and forgetting the ‘slippage’ settings. However, the trader’s transactions were reportedly detected and pre-executed by MEV (Maximum Extractable Value) bots on the Ethereum network, resulting in a loss of approximately $1.45 in gas fees.
Source: SpreekawThe event highlights the ongoing risks associated with decentralized finance (DeFi) trading, particularly in light of the growing prevalence of MEV attacks. MEV refers to the value that can be obtained by miners or bots through reordering operations, leading transactions, and other similar tactics. Meanwhile, as the DeFi market continues to grow, so does the potential for MEV attacks, leaving investors vulnerable to significant losses.
Developments around the Circle have raised questions
This news comes after the USDC stablecoin issuer Circle announced that $3.3 billion worth of USDC reserves remained at Silicon Valley Bank amid concerns about the bank’s solvency. As you follow on Kriptokoin.com, Circle has assured investors that their USDC assets remain safe and that the company has implemented additional measures to guard against potential risks. However, the news has raised questions about the stability of stablecoins and their underlying reserves.
As the DeFi market continues to evolve and grow, it is important for investors to be aware of the risks associated with trading these assets. While decentralized finance offers a promising new frontier for investment and financial innovation, it also comes with unique risks and challenges that need to be carefully considered. As always, investors should exercise caution and do extensive research before investing in any DeFi asset.
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