Crypto investor turns $50 million into $36,000 in one botched move

• A crypto trader lost about $50 million in a single transaction after swapping interest-bearing aEthUSDT for aEthAAVE through CoW Protocol.
• Large losses by slippage occasionally occur in decentralized finance (DeFi) when traders attempt to execute unusually large orders against shallow liquidity pools, with arbitrage bots exploiting the price dislocation.
• Aave founder Stani Kulechov said the interface had warned the user about extraordinary slippage and required explicit confirmation, which the user confirmed on their mobile device.

A crypto user lost roughly $50 million in a single transaction on Thursday after executing a large token swap that triggered massive slippage.

Blockchain data shows that the wallet attempted to swap $50,432,688 aEthUSDT – an interest-bearing token representing Tether's USDT stablecoin deposited into the Aave decentralized lending protocol on the Ethereum network – for aEthAAVE – similar version of Aave governance tokens – through the CoW Protocol.

The transaction executed with more than 99% slippage due to thin liquidity in the relevant trading pools, leaving the wallet with only about 327 aEthAAVE tokens, worth roughly $36,000 after the trade. The difference of the value was quickly captured by arbitrage traders and network intermediaries.

Large losses caused by slippage occasionally occur in decentralized finance (DeFi) when traders attempt to execute unusually large orders against shallow liquidity pools. In such cases, automated arbitrage systems rapidly exploit the price dislocations created by the trade.

Stani Kulechov, founder of the Aave protocol, said the trade went through despite multiple warnings presented to the user before confirming the transaction.

“Earlier today, a user attempted to buy AAVE using $50M USDT through the Aave interface,” Kulechov said in an X post. “Given the unusually large size of the single order, the interface warned the user about extraordinary slippage and required confirmation via a checkbox.”

According to Kulechov, the user accepted the warning on their mobile device and proceeded with the trade, explicitly acknowledging the risk of high slippage.

"The transaction could not be moved forward without the user explicitly accepting the risk," he said, adding that the CoW Swap routers functioned as intended and followed standard industry practices.

Still, the outcome was "clearly far from optimal," Kulechov said.

Kulechov said Aave plans to contact the affected user and return roughly $600,000 in fees collected from the transaction.

The loss comes just few days after about $27 million was liquidated on Aave, in what some market participants say may have been caused by a temporary pricing issue involving the token wstETH.

• Bitcoin has once again acted as a leading indicator for risk assets, plunging sharply before the ongoing global stock market swoon.
• Major equity benchmarks including the S&P 500, SPDR Financial Select Sector ETF and India's Nifty index mirror bitcoin's pre-cash price structure.
• Historical patterns, including episodes in 2017, before the COVID crash and in late 2021, suggest that bitcoin often peaks before the S&P 500.

Disclosure & Polices: CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. CoinDesk has adopted a set of principles aimed at ensuring the integrity, editorial independence and freedom from bias of its publications. CoinDesk is part of Bullish (NYSE:BLSH), an institutionally focused global digital asset platform that provides market infrastructure and information services. Bullish owns and invests in digital asset businesses and digital assets and CoinDesk employees, including journalists, may receive Bullish equity-based compensation.