Cardano Investor Loses 90% of $6.9 Million in Mistaken Swap

A Cardano investor, who held his assets for five years, accidentally lost more than $6 million in ADA due to a poor decision in using an illiquid trading pool to exchange his cryptocurrency for a stablecoin.

Key Takeaways

A five-year holder of Cardano (ADA) lost over $6 million in a swap gone wrong.
The swap was made using an illiquid trading pool, resulting in approximately $6.05 million in losses.
The user had made a test transaction shortly before the large swap, which highlighted the risks of trading in low liquidity environments.
The circumstances surrounding the swap raise questions about whether the user mistakenly intended to acquire the USDA stablecoin.

5-year Cardano hodler loses 90% of $6.9M ADA in bungled swap

This incident was initially highlighted by blockchain investigator ZachXBT on Sunday. The trade involved exchanging 14.4 million ADA tokens, valued at approximately $6.9 million, for 847,695 units of a stablecoin named Anzens (USDA). Unfortunately, the investor faced a substantial loss of around $6.05 million as a result.

Source: ZachXBT

The Cardano user, whose wallet address ends in “4x534,” seemed to first attempt a small transaction of 4,437 ADA for a different stablecoin labeled USD at 4:06 pm UTC on Sunday. This was just 33 seconds before the large swap involving the USDA took place. Prior to this trading activity, their wallet had been inactive since September 13, 2020.

Importance of Using Liquid Trading Pools

This unexpected trade serves as a crucial reminder about the importance of conducting swaps within liquid cryptocurrency pools, especially when dealing with large transactions that can impact market prices. Conducting trades in pools with low liquidity can lead to poor execution rates, resulting in significant losses.

According to data from CoinGecko, this particular transaction caused the price of ANZA to spike to nearly $1.26 before it subsequently dropped back down to $1.04 at the time of this report.

Was the Trader Confused with the USDA Swap?

It remains unclear whether the Cardano holder intended to acquire the lesser-known stablecoin, USDA, which currently has a market capitalization of only $10.6 million. Blockchain records indicate that this user had not previously held any USDA tokens before this transaction.

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In the world of cryptocurrency, so-called "fat-finger" transactions can have significant effects on the markets. For instance, just last month, the stablecoin issuer Paxos mistakenly minted a staggering 300 trillion of the PayPal USD (PYUSD) stablecoin before burning that entire amount approximately 22 minutes later.

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