Decentralized Exchange dYdX Responds to $9 Million Insurance Fund Loss
dYdX, a decentralized crypto exchange, has taken steps to reduce trading-related risks after losing $9 million from its insurance fund on November 17 when covering users’ losses. The exchange announced on X increased margin requirements on several “less liquid markets,” which include tokens such as Eos (EOS), 0x Protocol (ZRX), Aave (AAVE), Algorand (ALGO), Internet Computer (ICP), Monero (XRM), Tezos (XTZ), Zcash (ZEC), SushiSwap (SUSHI), THORChain (RUNE), Synthetix (SNX), Enjin (ENJ), 1inch Network (1INCH), Celo (CELO), Yearn.finance (YFI), and Uma (UMA).
The insurance fund was triggered after a $38 million liquidation of long positions on the YFI token on November 17. According to dYdX founder Antonio Juliano, the liquidation resulted from a “targeted attack” on the exchange. The attacker’s actions caused YFI’s open interest on dYdX to increase from $0.8 million to $67 million in a few days. This same attacker attempted to attack the SUSHI market on dYdX a few weeks earlier.
dYdX stated on X that “highly profitable trading strategies have now been banned on dYdX,” making reference to an exploit attack conducted by Avraham Eisenberg of $116 million in 2022. The exchange is now offering a bounty payment in exchange for valuable information for its investigation.
YFI Token Market Impact
The YFI token experienced a 43% decline in just a few hours on November 17 after seeing a 170% increase in November. This sharp decline resulted in over $300 million in market capitalization from the recent gains. However, the token has still gained over 90% in the past 30 days.
Hot Take: dYdX Adjusts Strategies After $9 Million Loss
Decentralized exchange dYdX is adapting its strategies after burning $9 million from its insurance fund to cover users’ losses. The exchange’s response includes increased margin requirements and the banning of highly profitable trading strategies. These changes aim to mitigate risk and prevent future attacks.
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