Due to an error in providing liquidity on a wBTC/CRV pool, a trader lost $700,000. This error was exploited by MEV trading bots, but we’ll see that profits were lower than expected.
A trader makes a $700,000 mistake on the wBTC/CRV pair
This weekend, Arkham’s on-chain analysts spotted a trader’s trades that led him to the loss of $700,000 when creating a liquidity pool on Uniswap V3 with wBTC-wrapped Bitcoin and Curve CRV.
In fact, it seems that the person behind these transactions mixed up the price of CRV and its quantity by adding 45 wBTC to the pool, a sum far too large for the CRV price at the time.
As a result, the interested party added the equivalent of $1.56 million, when it seems that $840,000 would have sufficed given the exchange rate at the time, creating an arbitrage opportunity. It was this opportunity that triggered numerous trading bots exploiting the Maximal Extractable Value (MEV), as they sought to quickly profit from the situation.
Arkham has identified a major transaction by a MEV bot, which enabled the owner of the address to recover $1.36 million in wBTC at a price of around $730 in CRV. However, this profit should be put into perspective, as it amounted to a mere $260.
And for good reason: this same address also paid $527,000 to the Ethereum validator of the current block, so that its transaction would be given priority. So, in the end, it’s the validator who stands to gain the most from the initial error:
MEV Bots instantly rushed the pool to swap CRV for valuable WBTC – with the first bot making off with $1.36M in WBTC for only $730K in CRV.
But the bot only netted ~$260, paying $527K of ETH to the validator just to make this transaction.
Tough luck! pic.twitter.com/3JbVwhwYoj
– Arkham (@ArkhamIntel) November 4, 2023
While the immutability of a blockchain brings undeniable advantages, it also entails major responsibilities, making the right to make mistakes far less acceptable under certain conditions. This case in point is a perfect example, given the sums involved.