The bitcoin market has grown as a result of Silicon Valley Bank, the largest banking crisis since 2008. When the business revealed its cash were retained in the bank, Circle and its stablecoin USDC were negatively impacted. To secure their assets, panicked cryptocurrency investors and communities sell tokens, which triggers unfortunate outcomes.
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.
After paying $45 in gas fees and $39,000 in MEV bribes, the bot generated a net profit of $2.045 million. As a result, the user traded 2.08 million USDC but only received 0.05 USDT.
Investors started exchanging their USDC tokens for other stablecoins like USDT in order to reduce losses. This is due to the stablecoin maintained by Circle losing its $1 peg today. In the last 24 hours, there has been a significant increase in the amount of stablecoins burned on controlled exchanges (CEX) and converted into other safer assets.
Investigations conducted on-chain revealed that this user had put the funds in a liquidity pool (LP), a popular bitcoin passive income model. The user may have exchanged his LP tokens for USDT for a 6% slippage. Drawn and burned on centralized exchanges (CEX) rose in the previous 24 hours as users sought to convert to other safer assets, but the user made the wrong choice.
Slippage is the difference between the transaction price and the actual conversion the trader actually received. Trades outside of this range can go ignored by setting slippage in the range of 0.5–10%. This user lost money on the trade because they made the fatal error of trading a lot of assets without allowing for slippage. The previous episode shows how a human error can cause irreparable financial damage.
The lowest price today is $0.88, while USDC is currently trading at $0.91.