Catenaa, Wednesday, June 4, 2025-A crypto trader suffered losses exceeding $500,000 on Thursday 29, after a cascade of automated trades and price distortions triggered a liquidation on the decentralized lending platform Euler.
The incident, tied to the synthetic dollar deUSD issued by the Elixir Network, has sparked renewed debate over Chainlink’s volume-weighted average price (VWAP) system.
The event began when an MEV bot swapped $210,000 USDT for $202,000 deUSD on Ethereum’s Curve pool.
The trade, though routine in execution, significantly impacted the price of deUSD, briefly driving it to $1.03 due to the pool’s low liquidity.
Chainlink’s oracle, which uses VWAP across multiple markets, adjusted its price feed accordingly. This price spike was reflected across protocols, ultimately triggering a liquidation on Avalanche.
Chainlink supporter Zach Rynes defended the oracle’s mechanics, stating it functioned as designed in a high-risk, low-liquidity environment. However, critics argue that such volatility in thin markets exposes vulnerabilities. Chaos Labs founder Omer Goldberg called the design “exploitable,” suggesting that stablecoins need price caps or more resilient pricing algorithms.
Chainlink remains the largest blockchain oracle provider, securing nearly $45 billion across 20 networks. However, the incident prompted rivals like Pyth to suggest manipulation was at play and reopened scrutiny of oracle reliability in decentralized finance.
The deUSD token, with a circulating supply of about $185 million, continues to pose challenges for platforms depending on fragile pricing signals in volatile markets.
