User exchanged 2 million USDC for 0,05 USDT after the SVB collapse
This happened after the stablecoin lost its peg to the US dollar
13.03.2023 - 08:15
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What’s new? On March 11, Circle, the issuer of the USDC stablecoin, announced that it held about $3,3 billion in reserves at bankrupt Silicon Valley Bank (SVB). The announcement triggered a loss of parity of the stablecoin with the US dollar. To cut their losses, investors began selling USDC in exchange for other stablecoins such as Tether (USDT). One transaction resulted in a user mistakenly exchanging over 2 million USDC for 0,05 USDT. A Twitter user under the nickname BowTiedPickle reported this.
With USDC insolvency fears rampant, users are fleeing to safety in other stables. Not all of them are going to make it there in one piece, however.Here's how one unlucky user paid $2,080,468.85 to receive $0.05 of USDT. pic.twitter.com/R8YdudWfsV — BowTiedPickle.eth | Solidity Shipper (@BowTiedPickle) March 11, 2023
What else is known about the situation? BowTiedPickle reported, citing blockchain data, that the user stored assets in a liquidity pool (LP) and could have sold his LP tokens for USDT with a 6% slippage, but chose a “questionable” method and used the decentralized exchange (DEX) KyberSwap aggregation router to drop a large number of coins at one point. In doing so, the investor forgot to set the slippage, which would have set an exact price of the token for the transaction to go through.
The KyberSwap service sent the transaction to one of the Uniswap v2 pools, which contained $2 of liquidity and had not been used for 251 days. Because of the large amount of assets coming in, the pool activated an MEV (maximal extractable value) bot, which generated a $2,045 million profit after paying $45 in blockchain transaction fees and $39 000 in internal fees.
On March 12, US banking regulators set up a plan to support bankrupt SVB and Signature Bank, under which their customers will have full access to their deposits starting March 13.
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