Shortly after Circle revealed that Silicon Valley Bank hadn’t moved $3.3 billion in USD Coin (USDC) reserves, the market responded with a massive sell-off — the stablecoin depegged from the U.S. dollar. However, not all investors were lucky enough to walk their money amidst the uncertainty.
To cut their losses, investors started selling their USDC tokens for other stablecoins such as Tether (USDT). Unfortunately, a transaction highlighted by Crypto Twitter member BowTiedPickle shows a USDC investor paying over $2 million to get $0.05 USDT.
On-chain investigations revealed that users have stored assets in liquidity pools (LPs) — a popular method of earning passive income in cryptocurrencies. The user could have sold his LP tokens for USDT with 6% slippage. However, they chose a "problematic" approach. As BowTiedPickle explains: "Unhappy soul dumped a chunk of 3CRV (DAI/USDC/USDT) LP tokens into USDT using KyberSwap aggregation router."
Given the race against time, the USDC investor forgot to set his slippage, which allows the investor to set the exact price of the token for the trade. He explained the nuances that ultimately led to the Maximum Extractable Value (MEV) robot netting $2.045 million in profit after paying $45 in gas fees and a $39,000 MEV bribe. The aforementioned incidents highlight how human error can lead to permanent loss of funds. When cashing out USDC to fiat or other cryptocurrencies, Cointelegraph advises investors to re-check information and transfer methods.
The sell-off in USDC sent the stablecoin’s value below $1 shortly after Circle confirmed that $3.3 billion was trapped by Silicon Valley Bank. At the time of writing, USDC has lost over 10% of its value and is trading at $0.8774.
