Crypto Whale Gets Rekt: Millions Evaporate in Low-Liquidity Price Spike

Crypto's latest 'whale fail' serves as a brutal reminder: even big players get crushed by thin order books.

When liquidity vanishes, fortunes disappear faster than a Bitcoin maximalist's patience during a bear market.

The takeaway? In crypto's Wild West, your portfolio balance is only as real as the last filled order—and today, someone learned that lesson the hard way.

Bonus jab: At least traditional finance whales lose money with the dignity of a Bloomberg Terminal error message.

Recently, an unusual event occurred in the cryptocurrency market, involving a remarkable price surge in the Cardano$0.498911 (ADA) coin due to low liquidity. This incident highlights the risks of price slippage in digital currency transactions. In particular, an investor’s oversight led to a sharp financial loss when the price temporarily soared to triple-digit levels.

Cardano Coin Price Surge

A significant holder of Cardano, known as a whale, attempted to convert 14.4 million ADA Coins into USDA, a stablecoin pegged to the US dollar. Due to low liquidity in this trading pair, the whale risked and likely inadvertently triggered a massive $7 million transaction, resulting in millions of dollars in losses.

On-chain detective ZachXBT commented on Twitter, highlighting the situation where the investor received only 847,000 USDA in return. This major error arose from the temporary sharp rise in ADA’s price and resulted in a massive $6.05 million loss. The ADA funds had remained inactive for nearly five years before this transaction.

This episode illustrates how a five-year accumulated waiting period culminated in a significant loss due to trying to exchange 14.4 million ADA Coins with diminished market liquidity. Such transactions highlight the risks of slippage in decentralized exchanges (DEX), where insufficient liquidity can lead to dramatic price movements, resulting in buying assets at substantially higher costs or selling them at much lower prices.

Mitigating Risks in DEX

Unlike decentralized exchanges, centralized exchanges rarely encounter such drastic episodes due to automated market Maker (AMM) mechanisms. These systems determine pricing based on the ADA/USDA ratio within the liquidity pool. Once the USDA reserves deplete, the investor inadvertently buys more expensive assets and witnesses their loss as ADA prices climb, leading to the pool’s skewed pricing.

Executing orders exceeding the liquidity available in pairs can lead to losses even on centralized exchanges. If a trader attempts to sell ADA Coins at a low price, they can deplete buyer liquidity if done on a centralized exchange, resulting in sales at that rate. The issue is more mechanical with DEXs.