Trader used GMX to manipulate AVAX price

The decentralised exchange GMX was affected by the actions of a single trader. Earlier, the platform’s founder ZigZag, who goes by the pseudonym Taureau, warned of possible problems.

An unknown user exploited the ‘minimum spread’ and ‘zero price impact’ features of the Avalanche network token (AVAX). The price manipulation affected GLP holders who provided GMX liquidity in the form of AVAX.

We were notified of price manipulation of AVAX/USD on reference exchanges by monitoring systems and community members.

While we review the occurrence, open-interest for AVAX has been capped at $2m long / $1m short.

GLP and GMX trading markets continue to operate normally.

— GMX 🫐 (@GMX_IO) September 18, 2022

“Open interest in AVAX is capped at $2 million on long positions and $1 million on short positions,” GMX noted.

Joshua Lim, head of derivatives at Genesis Trading, said that the unknown trader “successfully earned a profit […], by opening large positions with zero slippage.” After that, he moved AVAX/USD to centralized exchanges and repeated the actions five times.

3/ let’s take a look at the first cycle which took place from 01:15:31 to 01:28:11 UTC. X was able to extract roughly $158k in profit by trading clips of $4-5mm at a time pic.twitter.com/W6eu7Iz6lz

— Joshua Lim (@joshua_j_lim) September 18, 2022

Lim estimated the trader’s profit at $500 000-$700 000. He noted that the user “paid spreads to market makers on other venues, […] therefore the net income was lower.” He stressed that this was not an exploit, since “GMX was functioning as intended.”

“The real problem is that GMX does not reflect the true cost of liquidity, as other platforms do, and offers unlimited liquidity at the oracle’s average price,” added Lim.

On 2 September, Taureau questioned whether GMX had built a viable system in the long run.

Has $GMX built a viable system for the long-run?

ZigZag Founder @taureau_21 has his doubts… and predicts eventually that a trader with the right strategy and proper size will wipe out $GLP

Full Episode 🎥 https://t.co/3k3oLdHFWq pic.twitter.com/MF2Qafxs57

— Flywheelpod (@flywheelpod) September 2, 2022

Over the past 24 hours the GMX token has fallen about 10.6%, per CoinGecko. From above $48 (18 September) the asset slid to around $39.9.

In April, the CEO and founder of Waves Platform, Alexander Ivanov accused Alameda Research of manipulating the price of WAVES. The head of the company, Sam Bankman-Fried, called such statements “a poorly staged conspiracy theory”.

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