Liquidity Crunch Nightmare Leads to Crypto Trader’s Costly Move, Trader’s Misstep in USDR Crisis: Swapping 131k USDR for 0 USDCIn a recent cryptocurrency crisis involving the real-estate-backed U.S. dollar stablecoin, Real USD (USDR), a trader found themselves in a dire situation. Amid a liquidity crunch, the trader attempted to withdraw 131,350 USDR but ended up swapping it for a mere 0 USD Coin (USDC), resulting in a complete loss on their investment.
According to a report by blockchain analytics firm Lookonchain, this unfortunate swap took place on the BNB Chain via the decentralized exchange OpenOcean. It occurred at a time when USDR had depegged from its par value by nearly 50% due to the liquidity crunch. This situation allowed a maximal extractable value (MEV) bot to exploit the discrepancy, pocketing a substantial profit of $107,002 through an arbitrage trade.
Liquidity crises in the world of decentralized exchanges can lead to extreme slippage, with some cases experiencing losses of up to 100%. The incident serves as a reminder of the risks associated with such scenarios, with a similar situation occurring in September 2022 when a trader attempted to sell $1.8 million in Compound USD (cUSDC) through Uniswap and received only $500 worth of assets in return. In that case, an MEV bot also profited through arbitrage before being hacked.
The USDR crisis unfolded on October 11 as users requested the redemption of over 10 million stablecoins. Despite being advertised as 100% backed, it was revealed that less than 15% of its $45 million in assets were backed by liquid project tokens, with the rest tied to illiquid tokenized real estate assets. These tokenized assets, utilizing the ERC-721 standard, couldn’t be fractioned for liquidity, and the underlying real estate properties couldn’t be immediately sold to meet withdrawal demands. As a result, confidence in the Real USD Treasury eroded, leading to its collapse and a series of unfortunate events for investors.