- A 5-year ADA holder lost 90% of $6.9M in a faulty swap
- The loss occurred due to an illiquid ADA/USDA pool
- Experts warn against large trades in low-liquidity pools
A Cardano (ADA) investor who held the cryptocurrency for over five years made headlines this week after a devastating error wiped out most of their $6.9 million stash. The individual attempted to swap their ADA holdings for USDA — a Cardano-native stablecoin — but chose an extremely illiquid trading pool for the transaction.
What should have been a routine swap turned into a financial disaster, with the investor ending up with only $847,000 worth of USDA. That’s a loss of over 90%, all due to poor liquidity in the pool they used. In essence, the investor’s massive ADA sale caused the price in that specific pool to plummet, severely reducing the value they received in return.
Understanding Illiquid Pools
Decentralized exchanges (DEXs) rely on liquidity pools to enable token swaps. These pools need to have enough volume of both assets — in this case, ADA and USDA — to ensure smooth trades at fair prices. If a pool has low liquidity, large transactions can significantly move the price, leading to what’s called slippage.
In this incident, the Cardano holder didn’t split the trade into smaller parts or check for better liquidity across other pools. Instead, they proceeded with a single, massive swap, unknowingly triggering a massive price impact that worked against them.
Lessons for the Crypto Community
This unfortunate event is a reminder for traders — especially those moving large sums — to always check the liquidity and slippage settings before executing a swap on decentralized platforms. Tools like price impact warnings and multi-route swapping options are available on many DEXs and should be used to avoid such costly errors.
Moreover, the community has urged Cardano-based protocols to improve user interfaces and provide clearer warnings when a trade is about to incur high slippage. Preventing these losses should be a priority as DeFi continues to grow.
