cryptoglobe.com
A single trader has built up a massive position on the cryptocurrency exchange dYdX against the Yearn Finance’s YFI token, to the point that open interest for it jumped over 8,000% ahead of a price crash that the exchange’s founder said was part of an attack to drain its insurance fund.
The attack saw open interest on dYdX for YFI jumped from around $800,000 to $67 million as the trader built up their position and led to a YFI price crash amid a cascade of liquidations that topped $38 million in just 24 hours, wiping out $300 million of YFI’s market capitalization.
Open interest represents the number of outstanding derivatives contracts that haven’t yet been settled, and according to dYdX’s founder a single, well-capitalized actor was behind the rise in the metric as on-chain data shows. The attack was previously attemped on the platform’s SUSHI market.
The attacker, per the founder of the platform, was able to withdraw a large amount of USDC from the platform ahead of the price crash, which to him “seems like an intentional effort by a single actor (unsure whether the same or different one) to target the large OI on dYdX.”
Here are the main points we know about the $YFI incident on dYdX so far:
— Antonio | dYdX (@AntonioMJuliano) November 18, 2023
Reminder no user funds have been lost, but it is critical we understand what happened and adjust accordingly
– in the part few days $YFI open interest on dYdX spiked from $0.8m -> $67m
– basically all of…
The attack has raises suspicion, with many believing that the YFI price crash was part of an exit scam as developers hold a significant amount of the cryptocurrency, although on-chain data suggests some of the largest wallets belong to cryptocurrency exchanges.
Antonio M. Juliano, the founder of dYdX, mentioned that his team is actively cooperating with the FBI by providing information about the suspected perpetrator. Juliano also noted that any rewards offered would be allocated to community members who contributed to identifying the alleged attacker.
dYdX has decided not to offer any leniency or negotiation to the attacker, under the assumption that law enforcement will align with dYdX’s view and deem the trades illegal.
The platform has, according to its own social media team, banned “highly profitable trading strategies,” as the team behind the protocol shows humor in light of the recent incident.
Featured image via Unsplash.