Trader May Have Lost $9M in Exit from USDT

Opportunistic bots may have made off with millions of dollars worth of profits after one trader hastily tried to exit an enormous USDT position.

On May 12, Twitter user gzeon flagged that one USDT holder on the Arbitrum network appeared to have incurred a $9.4M loss after hastily trying to convert $15.5M USDT for USDC via Curve’s deployment on the Arbitrum blockchain. Curve is a decentralized exchange designed to facilitate efficient stablecoin trading.

Bots Attack

Transaction data from Arbiscan shows that the user sold 15.5M USDT and received just 6.14M USDC in exchange. Analyzing the data, Gzeon estimates that MEV bots made off with $3M from the transaction. Curve didn’t immediately respond to a request for comment.

MEV refers to Miner Extractable Value, which describes the practice of miners or other network validators manipulating the order of transactions in a network’s blockchain to extract profits.

MEV researchers Flashbots estimate that $8.3M was extracted from transactions on the Ethereum mainnet in the past 24 hours. More than $623M has been extracted through MEV from Ethereum to-date.

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The Defiant

The trade punctuated a week rocked by the failure of Terra’s algorithmic stablecoin UST. The leading centralized stablecoin, Tether (USDT), briefly lost its peg yesterday, sparking panic among holders.

The crisis has cast a spotlight on stablecoins, which have been far more volatile in the last seven days than Bitcoin or Ether, or even joke tokens like Dogecoin. In the last two days, Terra Network has been shut down twice after its flagship LUNA erased $40B in market value and UST, the ecosystem’s stablecoin, slipped its peg and crashed.

Opaque Reserves

Now fears are mounting that Tether, the sector’s largest stablecoin and one long been criticized for its opaque reserves, could also lose its peg.

Traders looking to offload Tether resulted in USDT’s price dropping to $0.97 on the centralized exchange Coinbase, with data from CoinMarketCap suggesting USDT slipped as low as $0.95. Curve Finance’s 3pool, which is comprised of USDT, DAI, and USDC, was briefly 80% composed of Tether as traders rushed to offload the stablecoin.

USDT has since regained its peg, with the company’s CTO assuring that Tether redemptions are operating as usual.

Uneasy Traders

Neutrino USD (USDN), the native stablecoin of the Waves network, has also tumbled amid the market turmoil.

In early April, USDN lost its peg and crashed down to $0.60 amid speculation that the growth of both it and the WAVES token were being fueled by borrowed USDC. While the stablecoin quickly rebounded, USDN failed to fully regain its peg and trended between $0.97 and $0.99 until yesterday.

According to CoinGecko, USDN slumped down to $0.76 yesterday and last changed hands for $0.89, suggesting traders are uneasy about holding the token.

USDN/USD. Source: CoinGecko

Other algorithmic stablecoins are fluctuating violently. FEI and Sperax USD have oscillated between roughly $0.97 and $1.02 in recent days. VAI also traded between $0.88 and $0.99, Decentralized USD has slumped below $0.90, and USDX last traded hands for $0.68.