We haven’t seen anything that happened 2 hours ago for a long time. Transactions made in parities with shallow liquidity cause abnormal pricing in altcoins. We have seen yet another example where price slippage has increased significantly due to user inattention. ADA Coin price jumped to triple digit levels.
ADA Coin
Cardano (ADA) 
$0.504067 One of the whales tried to convert 14.4 million ADA Coins into USDA two hours ago. USDA, a stablecoin pegged to the USD, is a pair to be cautious about due to shallow liquidity, but the whale missed it and lost millions of dollars, perhaps by mistake, when converting nearly $7 million worth of ADA Coin into USDA.
On-chain detective ZachXBT noticed this absurd incident and wrote:
“One Cardano The trader bought 847 thousand USDA (Cardano’s stablecoin pegged to the US dollar) for 14.4 million ADA ($6.9 million) two hours ago and lost $6.05 million due to the price temporarily rising sharply due to low liquidity. “These funds had previously been dormant for about 5 years.”
After 5 years of patient waiting, the investor wanted to convert 14.4 million ADA Coins into USDA, but because the market liquidity was very low, the ADA price rose abnormally in his transaction and he lost more than 6 million dollars. The most important risk for DEX users is price slippage. If there is not enough liquidity in the parity, such 80-100 times price movements will be triggered and the asset can be purchased much more expensive than normal. Or you can sell the asset for a much cheaper price than usual.
So why do we see this less in centralized exchanges? DEXs have AMM (Automated Market Maker) logic. Pricing is determined by the ADA/USDA ratio in the pool. In this transaction, as the USDA in the liquidity pool was emptied, the investor constantly bought it at a higher price, and we saw that he had a huge loss when his assets were exhausted. Because as the price of ADA increases, AMM decreases due to its structure. USDA takes. Because as the ADA pool overflows, the USDA empties and the pool price deteriorates while ADA starts to look overpriced.
What to Do?
Orders above liquidity in parities cause losses even on central exchanges. This is different from the DEX example if the trader did this on the central exchange and wrote a price of $0.001. ADA Coins If he wanted to sell, he could consume all his buyer liquidity up to the price he wrote and sell at that price. For DEXs this is more mechanical but it is what it is.
- First of all, it is best to avoid trading with non-preferred stablecoins. USDA is a stablecoin with a circulating supply of around 10 million, and making a million-dollar transaction with it should be considered dangerous even for someone with 1000 dollars.
- DEX If you do not have experience, you should trade on central exchanges and withdraw the assets you exchange to compatible wallets.
- Price, liquidity, volume should be what you check before trading.
All this aside, next week will be busy and CryptoAppsy It can make your job easier to stay up to date. The news section of the application is very useful with its quick news summary and live stream.
