Investors searching for high-yield projects in the decentralized finance (DeFi) space must prepare for the worse, which of course includes losing their entire investment.
An Ethereum whale (an address with large Ethereum-based assets) chasing DeFi gains learned that lesson in a rather harsh way, facing a situation where they had to recoup less than 0.3% of their investment within ninety minutes after putting (betting) their money.
The two transactions (buy and sell) was spotted by a Twitter user, Fomosaurus, whose bio reveals has been losing money in crypto since the days of the now-defunct crypto exchange, Mt Gox. Fomosaurus tweeted:
Can we pour one out for our 🐋 whale brother here that spent $130,548 for $EMN 1.5 hours ago and just sold it recently for $368.
— fomosaurus 🦖 (@fomosaurus) September 29, 2020
A closer look at the $EMN transaction
At 12:23:08 AM +UTC, the address used DeFi protocol Uniswap to sell 369 ETH (appr. $130,910) for 11,167,774 EMN, a new DeFi token that has a 20.38 billion token supply and is still being traded on Uniswap at the time of writing.
However, roughly 90 minutes after the buy order, the value EMN started to plummet dropping from over $0.016 per coin to 0 with an hour period. Eminence (EMN) token founder, Andrew Cronje who also founded Yearn Finance (YFI) subsequently reported that the project was exploited for $15 million worth of tokens.
But by then, the token’s value had plunged significantly.
Rather than lose all the invested amount, the whale address executed another transaction at 01:43:38 AM +UTC) which sold the stack of EMN tokens back into Wrapped Ether (wETH). The value recouped was 1.03 wETH which upon conversion would be $368, excluding fees. In other words, he had lost 99.71% of his initial investment.
It is worth noting that the ETH address involved in this transaction appears to have a large exposure to the DeFi space, currently holding over $787k worth of Pickle.Finance token (PICKLE) and small chunks of 21 other Ethereum-based tokens. The irrational dive into EMN depleted the whale’s ETH holdings which at the time of writing was just 1.85 ETH ($659.5).
Meanwhile, high volatility is just one of the challenges facing DeFi token traders. In a recent report, Coinfomania reported that a user almost lost appr. $1 million worth of Tether (USDt) after sending them to the stablecoin’s smart contract address. Tether helped the unfortunate user to recover the funds which otherwise would have been gone forever.
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