- A USDC trader paid over $2 million to receive $0.05 of USDT.
- This user did not set a slippage for his own trade.
The biggest banking crisis since 2008 called Silicon Valley Bank has added to the cryptocurrency market. Circle and its stablecoin USDC took a hit when the company announced its funds were kept in the bank. Crypto investors and communities sell tokens in a panic to secure their assets, which leads to disastrous events.
On March 11, when USDC and related stablecoins were being dumped in the crypto market, a USDC user who exchanged 2 million USDC into USDT on the chain was accidentally blocked by an MEV because no slippage was set.
The bot made a net profit of $2.045 million after paying $45 in gas fees and $39,000 in MEV bribes, which resulted in the user trading 2.08 million USDC but only receiving 0.05 USDT.
To cut losses, investors started selling their USDC tokens in exchange for other stablecoins, such as USDT. This is a result of Circle’s stablecoin losing its $1 peg today. The number of stablecoins withdrawn and burned on centralized exchanges (CEX) spiked in the past 24 hours to convert to other safer assets.
On-chain investigations indicated that this user had kept the assets in a liquidity pool (LP), which is a common way to generate passive income in cryptocurrency. For a 6% slippage, the user could have traded his LP tokens for USDT. Nevertheless, the user picked the incorrect way.
Slippage is the price difference in the transaction compared to the actual conversion received by the trader. Setting slippage in the range of 0.5-10% allows trades beyond this range to go unnoticed. In this case, this user made the fatal mistake of trading a large number of assets without placing slippage, which resulted in a loss in the trade. The preceding episode demonstrates how a human mistake may result in irreversible financial loss.
Currently, USDC is still trading at $0.91, the lowest recorded today is $0.88.
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