Major Loss for Cardano Whale: 90% of ADA Vanishes in Illiquid Stablecoin Swap

A significant loss has recently affected a Cardano whale who converted a large quantity of ADA tokens into a less liquid stablecoin, leading to a dramatic devaluation of his assets. This incident highlights the challenges of trading in markets with limited liquidity and the ongoing struggles within the Cardano ecosystem, especially concerning stablecoin availability.

Key Takeaways

The swap to an illiquid stablecoin resulted in a significant decline in value, with the whale losing about 90% of his ADA tokens.
Cardano's decentralized finance (DeFi) ecosystem is facing challenges, including low total value locked (TVL) and limited stablecoin liquidity.
The incident underscores the importance of liquidity in trading platforms for large transactions.

A weekend trading misstep cost a Cardano [ADA] whale dearly, as the holder endured a significant loss after swapping 14.4 million ADA tokens—valued at approximately $6.9 million—for only 847,695 USDA, a little-known stablecoin backed by U.S. dollars from Anzens on the Cardano blockchain. This swap resulted in an astonishing loss of $6.05 million, equating to about 90% of the original ADA value. The fluctuation was attributed to the stablecoin's low liquidity, according to well-known Web3 security analyst, ZachXBT.

Cardano whale

Source: ZachXBT/Telegram

Interestingly, the whale initially conducted a smaller transfer to test the waters before making the larger swap, after which he acquired Turtlecoin (TRTL) and other lesser-known cryptocurrencies.

Cardano whale loses 90% ADA after conversion to an illiquid stablecoin

Challenges of Cardano’s DeFi Ecosystem

The incident reveals significant liquidity challenges within Cardano’s ecosystem, exemplified by the Anzens USDA, which has a market cap of only $10 million. This limited liquidity creates risks, especially for larger transactions. A trading environment with sufficient volume and liquidity is essential for traders to smoothly enter and exit positions without negatively impacting the market or incurring losses.

On centralized exchanges like Binance and Coinbase, liquidity is robust, attracting traders with large orders. In contrast, decentralized exchanges (DEXs) on networks such as Ethereum [ETH], Hyperliquid [HYPE], Solana [SOL], and BNB Chain exhibit deeper liquidity, enhancing user experience considerably. Unfortunately, Cardano lacks this liquidity depth.

Currently, Cardano boasts only about $38 million in stablecoin liquidity, primarily comprising Moneta Dollar (USDM) and Anzens USDA.

Cardano whale

Source: DeFiLlama

In comparison, the BNB Chain has a stablecoin supply of $13.3 billion, while Solana holds approximately $13.4 billion and Hyperliquid manages around $4.7 billion. This means that Cardano's stablecoin supply constitutes less than 0.3% compared to those of Solana and BNB Chain. Its total value locked (TVL) currently stands at $226 million, which is relatively low.

These figures place Cardano at a disadvantage compared to its layer 1 competitors. In June, Charles Hoskinson, Cardano’s founder, acknowledged that the inadequate stablecoin supply is impeding the growth of its DeFi ecosystem. Ongoing discussions about integrating with the Bitcoin [BTC] network or converting parts of the ADA treasury into BTC have received mixed feedback, yet none of these initiatives seem to directly tackle the pressing DeFi issues as of now.