A cryptocurrency trader on GMX exchange leveraged the zero slippage feature to extract over $565,000 in profit by manipulating the price of the AVAX token.
GMX is a decentralized exchange that allows users to execute trades at zero slippage. Traders on the platform are able to execute trades at the same price it was initiated.
Head of derivatives at Genesis Trading, Joshua Lim, explained that the savvy trader manipulated GMX’s AVAX-USD price by opening large positions at zero slippage.
The trader used roughly $4.7 million to move AVAX’s price in a long and short position for five consecutive trades.
5/ this isn’t an exploit as much as GMX working as designed! X executed large trades in against GLP holders with 0 slippage: at the oracle price without factoring any price impact
in the real world, putting on risk requires you to pay liquidity providers on the opposite side
— Joshua Lim (@joshua_j_lim) September 18, 2022
Due to GMX’s design, the price impact was not factored in, as AVAX traded between $18.33 and $18.68 during the period of the incidence. The trader reportedly made between $500,000 and $700,000 profit from the manipulation.
Lim explained that the incident was not an exploit as the trader only manipulated a loophole in GMX’s design which was “working as designed!”
GMX moves to cap AVAX trade
Conversely, GMX has announced that it is actively working to resolve the situation. A GMX developer added that a viable solution could be published in about two weeks.
To curb further exploits, GMX has placed a limit on the tradable amounts for AVAX at $2 million for long and $1 million for short positions.
Some community members said GMX was moving too slowly as the loophole was discovered “weeks ago.”
ZigZag predicted this weeks ago. It was the inevitable exploit. What did GMX do, NOTHING.
— Rolipony (@rolipony) September 18, 2022
According to Cryptoslate data, $AVAX is currently trading at $16.87, shedding off over 7% in the last 24 hours. GMX exchange’s native token $GMX is sitting at $39,9, showing a decline of 10% since the incident occurred.