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Decentralized crypto exchange dYdX has taken significant steps to enhance risk management following the depletion of a $9 million insurance fund on November 17th, which was used to cover users’ losses.
This move comes in response to a targeted attack that caused the liquidation of nearly $38 million worth of positions due to a profitable trade on the YFI token.
In an announcement made on X (formerly Twitter), dYdX disclosed that it has raised margin requirements on several “less liquid markets,” impacting tokens such as Eos, 0x Protocol (ZRX), Aave, Algorand, Internet Computer, Monero, Tezos, Zcash, SushiSwap, THORChain, Synthetix Network Token, Enjin Coin, 1inch Network (1INCH), Celo, Yearn.finance, and Uma.
The founder of dYdX, Antonio Juliano, described the attack as a “targeted attack” on the exchange.
He explained that the individual behind the attack caused YFI’s open interest on dYdX to surge from $0.8 million to $67 million in just a few days.
This same individual had previously attempted to manipulate the SUSHI market on dYdX a few weeks earlier.
Despite increasing initial margin ratios for YFI, it proved insufficient to prevent the attack, as the actor managed to withdraw a significant amount of USDC just before the YFI price crash.
To mitigate similar risks in the future, dYdX has banned “highly profitable trading strategies” on its platform, using language reminiscent of Mango Markets’ exploiter Avraham Eisenberg during his $116 million attack in 2022.
READ MORE:Yearn.finance’s YFI Token Plummets 43% in Five Hours, Raising Exit Scam Concerns
The YFI token experienced a sharp decline of 43% within a few hours on November 17th, erasing over $300 million in market capitalization after a rapid 170% surge in November.
Nevertheless, over the past 30 days, the token still managed to gain more than 90%, trading at $9,190 at the time of writing.
Although the Yearn.finance team has not officially commented on the incident, there is no indication of them controlling the majority of the token supply.
Etherscan data shows that large centralized exchanges hold a significant portion of YFI tokens, dispelling initial concerns of a potential scam.
These developments mark a significant effort by dYdX to fortify its defenses and protect its users from similar incidents in the future.
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