Soon after Circle revealed that Silicon Valley Bank did not transfer $3.3 billion of its USD Coin (USDC) reserves, the market responded with a massive sell-off — depegging the stablecoin from the US dollar. However, not all investors were lucky enough to walk away with their funds amid the uncertainty.
To cut losses, investors started selling their USDC tokens in exchange for other stablecoins, such as Tether (USDT) and avoiding impermanent losses. Unfortunately, a member of Crypto Twitter who goes by the name BowTiedPickle highlighted a transaction that shows that a USDC investor paid over $2 million to receive $0.05 of USDT.
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.— BowTiedPickle.eth | Solidity Shipper (@BowTiedPickle) March 11, 2023
Here‘s how one unlucky user paid $2,080,468.85 to receive $0.05 of USDT. pic.twitter.com/R8YdudWfsV
On-chain investigations revealed that the user had stored the assets in a liquidity pool (LP) — a popular method to earn cryptocurrencies. The user could have sold his LP tokens for USDT for a 6 slippage. However, they chose to go for a ‘questionable’ method. As explained by BowTiedPickle:
“The unfortunate soul used the 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 slippage, which allows investors to set an exact price of the token for the transaction to go through. He further explained the various nuances that eventually led to an MEV bot netting $2.045 million in profit after paying $45 in gas and $39k in MEV bribes.
The above episode highlights how human error can result in permanent loss of funds. While cashing out USDC for fiat or other cryptocurrencies, Cointelegraph advises investors to recheck the information and methods of transfer.
Soon after Circle confirmed that $3.3 billion was stuck with Silicon Valley Bank, a resultant sell-off of USDC caused the stablecoin’s value to go below $1.
1/ Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB.— Circle (@circle) March 11, 2023
At the time of writing, USDC lost over 10 of its value as it traded at $0.8774.