dYdX Tightens Reins on Risky Trading, Raises Margin Requirements for Certain Markets

Decentralized crypto exchange, dYdX, has disclosed new measures aimed at minimizing trading-related risks. Over the weekend, the platform announced an increase in margin requirements across various markets. This strategic move comes in response to a purported targeted attack on the YFI token, which resulted in substantial liquidation.

According to a statement released on X, dYdX has raised margin requirements in various “less liquid markets.” This adjustment has impacted tokens such as EOS, 0x Protocol (ZRX), Aave, Algorand, Internet Computer, Monero (XMR), Tezos, Zcash, SushiSwap, THORChain, Synthetix, Enjin, 1inch Network (1INCH), Celo, Yearn.finance, and Uma.

The decentralized exchange 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. As a consequence, $9 million from the insurance fund was depleted during this event.

dYdX founder Antonio Juliano labeled the move a “targeted attack” on the exchange. According to him, the surge in YFI’s open interest on the platform from $800k to $67 million within days was attributed to the actions of a single individual. Juliano also noted that this same individual had previously attempted to attack the SUSHI market on dYdX a few weeks prior. He said:

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.

On X, the exchange’s team announced the prohibition of “highly profitable trading strategies” on dYdX, employing language reminiscent of Avraham Eisenberg, the exploiter behind the $116 million attack on Mango Markets in 2022. The exchange has also introduced a bounty program, offering compensation for valuable information.

On November 17, the YFI token experienced a rapid 43% decline within the space of a few hours. According to data from CoinMarketCap, the decline erased over $300 million in market capitalization from its recent surge, which had seen a remarkable 170% increase in November. Nevertheless, the token has maintained a substantial gain of over 90% over the past 30 days. It was trading at $9,190 as of press time.

The Yearn.finance team has not provided any official information regarding the incident. However, a source familiar with the situation revealed that the majority of the token supply is not under the control of developers, dispelling initial worries of a possible scam. This assertion is substantiated by Etherscan data, which identifies large centralized exchanges as the top holders of YFI.