dYdX raises margin requirements in some markets, bans “highly profitable trades”

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Decentralized crypto exchange dYdX has disclosed new measures to mitigate trading-related risks after burning $9 million of its insurance fund on Nov. 17 to cover users’ losses.

According to an announcement on X (formerly Twitter), the exchange increased margin requirements on several “less liquid markets,” affecting tokens such as Eos (EOS), 0x Protocol (ZRX), Aave (AAVE), Algorand (ALGO), Internet Computer (ICP), Monero (XRM), Tezos (XTZ), Zcash (ZEC), SushiSwap (SUSHI), THORChain (RUNE), Synthetix (SNX), Enjin (ENJ), 1inch Network (1INCH), Celo (CELO), Yearn.finance (YFI), and Uma (UMA).

dYdX triggered its insurance fund to cover users’ trading losses on Nov. 17 after a profitable trade targeting long positions on the YFI token caused the liquidation of positions worth nearly $38 million.

dYdX founder Antonio Juliano dubbed the move a “targeted attack” on the exchange. According to him, YFI’s open interest in dYdX spiked from $0.8 million to $67 million in a matter of days as a result of the actions of one individual. The same individual, according to Juliano, attempted to attack the SUSHI market on dYdX a few weeks earlier.

“We did take action to increase initial margin ratios for $YFI prior to the price crash, but this was ultimately not sufficient. The actor was able to withdraw a good amount of $USDC from dYdX right before the price crash,” he wrote.

On X, the exchange’s team said that “highly profitable trading strategies have now been banned on dYdX,” in a reference to the language used by Mango Markets’ exploiter Avraham Eisenberg in his $116 million attack of 2022.

dYdX is now offering a bounty payment in exchange for valuable information:

The YFI token declined by 43% in just a few hours on Nov. 17 after soaring over 170% in November. The sharp decline wiped out over $300 million in market capitalization from the recent gains, according to data from CoinMarketCap. In the past 30 days, however, the token has still gained over 90%, trading at $9,190 at the time of writing.

The Yearn.finance team hasn’t disclosed any official details about the incident. A source familiar with the matter told Cointelegraph that developers on the team do not control the majority of the token supply, strongly refuting initial concerns about a potential scam. The claim is supported by Etherscan data showing large centralized exchanges as YFI top holders.

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