Dormant Cardano Wallet Loses $6 Million in Catastrophic Token Swap Due to Low Liquidity

A Cardano wallet that had remained dormant since September 2020 recently executed a disastrous cryptocurrency swap that resulted in a loss exceeding $6 million, according to blockchain data analyzed by on-chain investigator ZachXBT. The incident has reignited discussions within the cryptocurrency community about the critical importance of liquidity management and slippage protection when executing large trades.

The Transaction That Went Wrong

The wallet, identified by the address addr...r4x534, attempted to exchange 14.4 million ADA tokens—valued at approximately $6.9 million at the time—for USDA (US Dollar Anzens), a Cardano-native stablecoin issued by Anzens Inc. The trade resulted in the wallet holder receiving only 847,695 USDA tokens, translating to a loss of approximately $6.05 million, or roughly 88% of the original position.

The incident was first brought to public attention by blockchain investigator ZachXBT on November 16, 2025. ZachXBT, an anonymous but highly respected figure in the cryptocurrency space, has built a reputation for exposing scams, tracking stolen funds, and identifying fraudulent activity across blockchain networks through meticulous on-chain analysis.

Understanding What Went Wrong

The catastrophic loss stemmed from the liquidity pool for ADA/USDA containing only $1.9 million, a fraction of the trade's size. When the holder attempted to execute the massive swap, the insufficient liquidity caused extreme price slippage—a phenomenon where the execution price of a trade differs significantly from the expected price.

In decentralized finance, slippage occurs when large trades are executed in pools without adequate depth to absorb the order. As the trade processes, it progressively moves the price against the trader, resulting in an increasingly unfavorable exchange rate. The massive slippage was caused by low liquidity, which triggered a sharp, temporary price spike in USDA.

Data from CoinGecko indicated that this transaction appeared to increase USDA's price to approximately $1.26 before it declined back to $1.04. This temporary spike meant the wallet holder was effectively buying USDA at inflated prices as their own order pushed the market higher, ultimately receiving a fraction of the stablecoin value they anticipated.

The Dormant Wallet's History

Before the November transaction, the Cardano wallet address had been dormant since September 13, 2020—a period of approximately five years. Blockchain data reveals an intriguing detail: the user appeared to make a test transaction of 4,437 ADA for a US dollar stablecoin just 33 seconds before the multimillion-dollar swap.

This test transaction suggests the wallet holder may have been attempting to verify the swap process before committing the larger amount. However, the small test would not have revealed the liquidity issues that would devastate the main transaction, as the price impact of such a minor swap would have been negligible.

Following the disastrous trade, blockchain records show the holder has since acquired other low-market-cap tokens, raising questions about their understanding of liquidity dynamics and trading best practices.

The USDA Stablecoin

USDA is a relatively new entrant to the Cardano stablecoin ecosystem. The stablecoin is designed to be pegged to the U.S. Dollar with 100% reserves backed by dollars and dollar equivalents, such as US government treasuries. Anzens Inc. serves as the issuer, with technology infrastructure provided by EMURGO, a founding entity of Cardano, and operational support from Encryptus, a licensed financial services company.

However, USDA has a market cap of just $10.6 million, making it a relatively illiquid asset compared to major stablecoins like USDT or USDC, which have market capitalizations in the tens of billions of dollars. The stablecoin was made available on the Minswap decentralized exchange earlier in 2025, but its limited adoption and liquidity have posed significant risks for large traders.

Cardano's Broader Liquidity Challenges

This incident has highlighted a persistent challenge within the Cardano ecosystem: limited stablecoin liquidity. Cardano had only $38 million in stablecoin liquidity, mostly dominated by Moneta dollar (USDM) and Anzens USDA, representing less than 0.3% compared to competitors like Solana and BNB Chain, which have stablecoin supplies of $13.4 billion and $13.3 billion, respectively.

In June, Charles Hoskinson, the founder of Cardano, admitted that the limited stablecoin supply was harming its DeFi growth. The lack of deep, liquid stablecoin pools makes the Cardano DeFi ecosystem more vulnerable to price slippage and limits its attractiveness to institutional traders and large-volume users who require predictable execution for significant transactions.

Understanding Slippage and Liquidity in DeFi

Slippage is an inherent risk in decentralized exchange trading, particularly on platforms using automated market maker (AMM) models. Unlike traditional order book exchanges, where buyers and sellers are matched directly, AMMs rely on liquidity pools where traders swap tokens according to mathematical formulas.

The size of a trade relative to the available liquidity determines the degree of slippage. Small trades in well-funded pools typically experience minimal slippage, while large trades in shallow pools can cause dramatic price movements. Most decentralized exchanges offer slippage tolerance settings that allow users to set maximum acceptable price deviation—if the actual slippage exceeds this threshold, the transaction fails automatically.

However, in this incident, the Cardano holder pushed through a massive, single-shot swap without checking liquidity levels or evaluating alternative pools. Security analysts at financial technology company OneSafe explained that the root cause relates to the critical importance of liquidity depth, noting that when pools are shallow, even a single large order can distort market prices dramatically.

Industry Reactions and Lessons Learned

ZachXBT labeled the mishap his "On-chain clown of the month", and the incident has become a cautionary tale within the cryptocurrency community. The event underscores several critical lessons for DeFi participants:

Assess Liquidity Before Trading: Before executing large orders, traders must verify that sufficient liquidity exists to support their transaction size without causing significant price impact. Blockchain explorers and DEX interfaces typically display liquidity pool depths, allowing traders to gauge whether their order is appropriate for the available market.

Use Slippage Protection: Most decentralized exchanges provide slippage tolerance settings. Setting appropriate limits ensures transactions will fail rather than execute at catastrophically unfavorable prices. While failed transactions still incur gas fees, these costs are minimal compared to multi-million dollar losses from excessive slippage.

Split Large Orders: Professional traders typically divide substantial transactions into smaller batches executed over time. This strategy, known as order splitting or time-weighted average pricing, minimizes market impact and reduces the risk of dramatic price movements.

Understand Token Liquidity: It remains unknown if the Cardano user had intended to buy the little-known stablecoin, but the choice of USDA—a token with limited market capitalization and trading volume—significantly contributed to the loss. Traders should prioritize liquid, well-established assets for large transactions.

Test Transactions Are Not Sufficient: While the wallet holder conducted a small test swap, this did not reveal the liquidity constraints that would affect the larger transaction. Test transactions should be accompanied by thorough research into pool depth, recent trading volume, and historical price stability.

Broader Market Impact

Following the swap, Cardano's native token ADA dropped by approximately 2.5% over 24 hours, underperforming the broader crypto market. Analysts attributed the decline to heightened caution among traders and concerns about the ecosystem's liquidity infrastructure.

The incident has also prompted discussions within the Cardano community about the need for improved liquidity mechanisms, better user education, and enhanced warnings on decentralized exchange interfaces when users attempt trades that could result in extreme slippage.

The Path Forward

Cardano developers and stablecoin teams like Anzens have acknowledged the incident and committed to improving liquidity protocols and pool design. Implementing robust liquidity mechanisms, dynamic pricing models, and automated risk mitigation strategies will be essential to prevent similar losses in the future.

For the broader DeFi ecosystem, this event serves as a reminder that technological functionality alone cannot eliminate risk. As decentralized finance continues to expand, strategic liquidity management, comprehensive user education, and transparent governance remain necessary components to ensure long-term stability and investor confidence.

The Cardano wallet's $6 million loss stands as one of the largest single-transaction losses recorded on the Cardano blockchain and illustrates the double-edged nature of decentralized finance. While DeFi platforms offer unprecedented access to financial services without intermediaries, they also require users to possess sophisticated knowledge of market mechanics, liquidity dynamics, and risk management strategies.

As the cryptocurrency industry matures, such incidents highlight the ongoing need for improved user interfaces that clearly communicate risks, enhanced liquidity across all blockchain ecosystems, and continued education to help participants navigate the complexities of decentralized trading safely and effectively.