GMX DEX Falls Victim to $400k Price Manipulation That Made Use of its No Slippage Feature
The decentralized exchange (DEX) GMX has fallen victim to an exploit by a large and sophisticated trader who reportedly was able to “siphon all the liquidity” from its avalanche (AVAX) market and profit from the manipulated price.
According to multiple threads posted on Twitter by leading members of the crypto community, the price of AVAX was manipulated by a large “whale” who first took a multi-million-dollar position in AVAX on GMX, and then manipulated the price higher on other exchanges.
According to some sources, the trader made up to $1m by doing this, while others claim the profit from the market manipulation was only about half of that.
GMX differs from most other exchanges – both centralized and decentralized – in that it has a special feature that lets users avoid slippage, even for large orders.
In trading, slippage is the difference between the price a trader thinks he will get and the one he actually gets when the trade is executed. On all exchanges, large orders in particular can cause slippage, as there sometimes isn’t enough liquidity available at the best market price to accommodate the entire order. In particular, this can be a problem for smaller tokens with little trading volumes.
On GMX, the exchange promises that the spot price in its market will not change no matter how large of an order is placed in the market, thus letting the user avoid slippage. Consequently, the trader who exploited the exchange was able to take a large position in AVAX without affecting the price, before then driving up the price of the same token on another exchange.
AVAX has relatively low liquidity compared to major cryptoassets like bitcoin (BTC) and ethereum (ETH), which also makes it easier for large traders to manipulate its
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