Shortly after Circle announced that Silicon Valley Bank did not transfer $3.3 billion of USD Coin (USDC) reserves, the market responded with a sell-off – depegging the stablecoin from the US dollar. However, not all investors are lucky enough to walk away with their funds amidst the uncertainty.
To reduce losses, investors started selling USDC tokens in exchange for other stablecoins, such as Tether (USDT) and avoid non-permanent losses. Unfortunately, a Crypto Twitter member who goes by the name BowTiedPickle highlighted a transaction that showed USDC investors paid more than $2 million to receive $0.05 of USDT.
With fears of USDC insolvency growing, users fled to safe havens in other cages. Not everyone will make it in one piece, however.
Here’s how an unlucky user paid $2,080,468.85 to receive $0.05 of USDT. pic.twitter.com/R8YdudWfsV
— BowTiedPickle.eth | Sender Solidity (@BowTiedPickle) March 11, 2023
An on-chain investigation revealed that users have been storing these assets in a liquidity pool (LP) – a popular way to acquire cryptocurrencies. Users can sell LP tokens for USDT with 6% slippage. Instead, he chose a ‘questionable’ method. As explained by BowTiedPickle:
“Unfortunate souls used KyberSwap aggregation routers to dump large clips of 3CRV (DAI/USDC/USDT) LP tokens into USDT.”
Due to the race against time, USDC investors forgot to adjust the slippage, which allows investors to set the exact token price for the transaction. He further explained the various nuances that ultimately resulted in the MEV bot making a profit of $2.045 million after paying $45 in gas and $39k in MEV bribes.
The above episode highlights how human error can lead to permanent loss of funds. When issuing USDC for fiat or other cryptocurrencies, Cointelegraph advises investors to double-check their information and transfer method.
related: Breaking: Circle announces $3.3B tied up in Silicon Valley Bank
Shortly after Circle confirmed that $3.3 billion was stuck with Silicon Valley Bank, the resulting USDC sale caused the stablecoin’s value to drop below $1.
1 / After confirming at the end of today that the wire that started on Thursday to clear the balance has not been processed, $3.3 billion of the ~$40 billion USDC reserves remain in SVB.
– Circle (@circle) March 11, 2023
At the time of writing, USDC has lost over 10% of its value as it trades at $0.8774.