Shortly after Circle revealed that Silicon Valley Bank failed to transfer $3.3bn of its USD Coin (USDC) reserves, the market responded with a 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 began selling their USDC tokens in exchange for other stablecoins, such as Tether (USDT). Unfortunately, a transaction highlighted by Crypto Twitter member BowTiedPickle shows that a USDC investor paid over $2 million to receive $0.05 of USDT.
With USDC insolvency fears running rampant, users are fleeing to safety in other stables. However, not everyone is going to get there in one piece.
This is how one unfortunate user paid $2,080,468.85 to receive $0.05 of USDT. pic.twitter.com/R8YdudWfsV
— BowTiedPickle.eth | Solidity Carrier (@BowTiedPickle) March 11, 2023
On-chain investigations revealed that the user had stored the assets in a liquidity pool (LP), a popular method of earning passive income in cryptocurrency. The user could have sold their LP tokens for USDT for a 6% slippage. However, they opted for a “questionable” method. As BowTiedPickle explains:
“The unfortunate soul used the KyberSwap aggregation router to dump a large clip of LP 3CRV (DAI/USDC/USDT) token into USDT.”
Given the race against time, the USDC investor forgot to set his slippage, allowing investors to set an exact token price for the transaction to take place. He explained the nuances that eventually led to a maximum withdrawable value (MEV) bot making $2.045 million in profit after paying $45 in gasoline and $39,000 in MEV bribes.
The above episode highlights how human error can result in a permanent loss of funds. When charging USDC for fiat or other cryptocurrencies, Cointelegraph advises investors to double-check information and transfer methods.
Related: Breaking: Circle reveals $3.3 billion tied up in Silicon Valley Bank
Shortly after Circle confirmed that $3.3 billion was locked up in Silicon Valley Bank, the resulting USDC sell-off caused the stablecoin’s value to fall below its $1 peg.
1/ Following confirmation late today that transfers initiated on Thursday to clear balances have not yet been processed, $3.3bn of the ~$40bn USDC reserves remain in SVB.
— Circle (@circle) March 11, 2023
At the time of writing, the USDC has lost more than 10% of its value and is trading at $0.8774.
