dYdX Increases Margin Requirements, Prohibits Certain Trades

dYdX, a decentralized cryptocurrency exchange, has announced new trading restrictions and increased margin requirements following a significant loss from its insurance fund.

This decision was made in response to a series of events that led to the loss of $9 million from the fund on November 17th, intended to compensate users for their trading losses.

Did you know?

Want to get smarter & wealthier with crypto?

Subscribe - We publish new crypto explainer videos every week!

What is Basic Attention Token (BAT)? Brave Browser EASILY Explained

SUBSCRIBE

ON YOUTUBE

The crypto exchange revealed that the margin requirements have been heightened for various "less liquid markets," impacting a range of tokens, including Aave (AAVE), Eos (EOS), Monero (XMR), and several others. This change is a part of dYdX's strategy to mitigate trading-related risks.

These changes were triggered by a profitable trade that targeted long positions in the YFI token, resulting in nearly $38 million of liquidations. 

dYdX founder Antonio Juliano described this incident as a "targeted attack" on the crypto exchange. He noted a dramatic increase in YFI's open interest and linked it to the actions of a single individual. This individual was also suspected of a prior attempt to manipulate the SUSHI market on dYdX.

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.

In addition to the increased margin requirements, dYdX has banned "highly profitable trading strategies."

The YFI token experienced a dramatic 43% decline in value within hours on November 17th, following a significant rise earlier in the month.

This drop erased over $300 million in market capitalization from its recent gains. Despite this, the token still shows a considerable 90% gain over the past 30 days, trading at $8,956 at the time of writing.

The Yearn.finance team has not released official statements regarding the incident. However, sources close to the matter have refuted any allegations of a scam. Etherscan data corroborates that most of the YFI supply is not controlled by the developers but is held by large centralized exchanges.