Cardano whale loses 90% ADA after conversion to an illiquid stablecoin 

Key Takeaways

Why did the whale lose $6M? 

The low liquidity triggered fluctuations and a subsequent devaluation of the swapped funds. 

What’s the status of Cardano DeFi? 

Besides a relatively low TVL, Cardano’s ecosystem is struggling with a limited stablecoin supply. 

A Cardano [ADA] whale got a painful lesson on trading on illiquid platforms over the weekend.

The 5-year-old holder swapped 14.4 million ADA tokens, worth $6.9 million, for only 847,695 USDA, a little-known USD-backed stablecoin by Anzens on the Cardano blockchain. 

That translated to a $6.05 million loss or about 90% devaluation of his initially transferred ADA stash. According to renowned Web3 security analyst ZachXBT, the fluctuation was due to the stablecoin’s low liquidity.  

Source: ZachXBT/Telegram

Interestingly, the whale made a small transfer as a test before making the ill-fated large transfer. As of writing, he scooped Turtlecoin (TRTL) and other lesser-known coins. 

Cardano DeFi liquidity problem

That said, the Anzens USDA had only $10 million in market cap, underscoring its liquidity risk, especially for large transactions.

For a frictionless trading experience, the volume and liquidity of a platform, as well as its assets, are always crucial. 

Players can smoothly enter and exit positions without distorting the market or incurring losses in a more liquid venue.

On centralized platforms, Binance, Coinbase, and others rank high in terms of liquidity, which attracts players with large orders. 

On on-chain platforms, DEXes across Ethereum [ETH], Hyperliquid [HYPE], Solana [SOL], and BNB Chain platforms have demonstrated significant liquidity depths, providing a smooth experience. 

But such depths are lacking across the Cardano ecosystem. Its low stablecoin supply is one of the telltale signs of Cardano’s DeFi inefficiency. 

It had only $38 million in stablecoin liquidity, mostly dominated by Moneta dollar (USDM) and Anzens USDA. 

Source: DeFiLlama

In contrast, BNB Chain has a stablecoin supply of $13.3 billion, while Solana has of $13.4 billion. Hyperliquid, on the other hand, has $4.7 billion.

Put differently, Cardano has a stablecoin supply of less than 0.3%, compared to Solana and BNB Chain. Its TVL (total value locked) is relatively low ($226m) as well. 

Yet, these are its L1 competitors. In June, Charles Hoskinson, the founder of Cardano, admitted that the limited stablecoin supply was harming its DeFi growth. 

Recent plans to integrate with the Bitcoin[ BTC] network or swap some of the ADA treasury into BTC have been met with mixed reactions. However, none appears to be addressing its DeFi issues, at least as of writing.