Risks of Illiquid Pools Highlighted in DeFi Trading Mishap
In the decentralized finance (DeFi) sector, where liquidity can make or break large transactions, a recent incident underscores the perils of using low-volume trading pools for significant swaps. On November 17, 2025, a veteran Cardano holder, inactive since September 13, 2020, executed a trade that resulted in a substantial financial loss, drawing attention to the need for careful pool selection amid growing DeFi adoption.
Details of the Failed Transaction
The holder, identified by the wallet address “addr…4×534,” attempted to swap Cardano’s native token (ADA) for a stablecoin but encountered severe slippage due to the pool’s limited liquidity. Key facts from the blockchain transaction include:
- Swap Volume: 14.4 million ADA, valued at approximately $6.9 million at the time of execution.
- Received Amount: 847,695 units of the Anzens USD (USDA) stablecoin.
- Net Loss: Around $6.05 million, representing over 90% of the initial ADA value.
- Timing: The main swap occurred at 4:06 pm UTC on November 16, 2025, following a small test transaction of 4,437 ADA for a USD stablecoin just 33 seconds earlier.
This event was first flagged by blockchain investigator ZachXBT, who noted the unusual activity on social media. The wallet’s five-year dormancy prior to the trade adds context to the holder’s long-term investment strategy, typical among early Cardano adopters betting on the blockchain’s scalability upgrades.
Market Impact and Broader Implications
The transaction not only affected the individual trader but also briefly disrupted the USDA stablecoin’s peg. According to market data, USDA’s price surged to nearly $1.26 immediately after the swap before stabilizing at $1.04. With USDA’s total market capitalization standing at just $10.6 million, such a large influx highlighted vulnerabilities in smaller DeFi ecosystems.
- Liquidity Lesson: Experts emphasize that large orders in illiquid pools can lead to unfavorable execution rates, where the trade price deviates sharply from market value due to insufficient counterparties.
- Historical Precedents: Similar “fat-finger” errors have occurred in crypto, such as last month’s incident where stablecoin issuer Paxos minted and subsequently burned 300 trillion units of PayPal USD (PYUSD) within 22 minutes, though no net loss was reported there.
- Uncertainties: It remains unclear whether the trader intended to acquire USDA, as blockchain records show no prior holdings of the token in the wallet. This could indicate a selection error or interface glitch, though no evidence of external interference has surfaced.
ZachXBT commented on the incident, stating, “Avoid larger transfers in small liquidity pools at all costs,” reinforcing the advisory tone prevalent in DeFi communities. As DeFi platforms continue to evolve with tools like automated market makers, incidents like this serve as reminders of the sector’s inherent risks. Traders are increasingly advised to use simulators or split large orders to test liquidity. Would you double-check liquidity before your next DeFi swap?
