Decentralized exchange (DEX) dYdX had to take out millions from its insurance fund to cover user liquidations on its platform. This action was forced after the recent liquidations in the Yearn.Finance (YFI) market.
What Led To The $9 Million Insurance Fund Withdrawal?
On Saturday, November 18, the Yearn.Finance’s governance token (YFI) witnessed a drastic 43% decline in value, leading to a wipeout of $50 million in YFI Open Interest.
Consequently, this dramatic drop in price triggered a moment of fear, uncertainty, and doubt (FUD) within the crypto community, with some members speculating on the possibility of an exit scam.
In a post on the X (formerly Twitter) platform, the team behind dYdX disclosed that about $9 million from the platform’s v3 insurance fund was used to fill gaps in liquidations processed in the YFI market.
Last night about $9m from the dYdX v3 insurance fund were used to fill gaps on liquidations processed in the YFI market. The v3 insurance fund remains well funded with $13.5m in funds remaining
No user funds were affected and our team is working to investigate the event
— dYdX (@dYdX) November 18, 2023
According to the decentralized exchange’s website, the insurance fund is “the first backstop to maintain the solvency of the system when an account has a negative balance.” The fund is not…
