Soon after, Circle revealed this Silicon Valley Bank has not transferred $3.3 billion from his USD Coin (USDC) reserves, the market responded with a massive selloff — depegging the stable coin from the US dollar. However, not all investors were lucky enough to walk away with their funds amid the uncertainty.
To mitigate losses, investors began selling their USDC tokens in exchange for other stablecoins, such as Tether (USDT). Unfortunately, one transaction highlighted by Crypto Twitter member BowTiedPickle shows that a USDC investor paid over $2 million to receive $0.05 USDT.
With USDC default fears spreading, users are fleeing to safety in other stables. However, not all of them will get there whole.
This is how one unfortunate user paid $2,080,468.85 to get $0.05 USDT. pic.twitter.com/R8YdudWfsV
— BowTiedPickle.eth | Solidity Shipper (@BowTiedPickle) March 11, 2023
On-chain investigations revealed that the user was holding the assets in a Liquid Pool (LP), a popular method of earning passive income in cryptocurrencies. The user could sell their LP tokens for USDT for a 6% pass. However, they chose a “dubious” method. As explained by BowTiedPickle:
“Unfortunate soul used KyberSwap aggregation router to dump a large clip of 3CRV (DAI/USDC/USDT) LP token into USDT.”
Given the race against time, the USDC investor forgot to set his pass, which allows investors to set an exact token price for the transaction to go through. He explained the nuances that ultimately resulted in a Maximum Extractable Value (MEV) bot that made $2.045 million in profit after paying $45 in gas and $39,000 in MEV bribes.
The above episode highlights how human error can lead to permanent loss of funds. While withdrawing USDC for fiat or other cryptocurrencies, Cointelegraph advises investors to double-check information and transfer methods.
Connected: Exclusive: Circle reveals $3.3 billion tied up in Silicon Valley Bank
Soon after Circle confirmed that $3.3 billion remained in Silicon Valley Bank, the subsequent USDC selloff caused the stablecoin’s value to fall below its fixed value of $1.
1/ Following confirmation late today that the transfers initiated on Thursday to remove balances have not yet been processed, $3.3 billion of the ~$40 billion USDC reserves remain in SVB.
— Circle (@circle) March 11, 2023
At the time of writing, USDC has lost over 10% of its value and is trading at $0.8774.
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