A memecoin investor got unlucky earlier today, losing $341,000 in just one minute in a seemingly simple transaction. As revealed by the on-chain data platform Lookonchain, the trade involved 2,500 SOL, valued at roughly $342,100.
What Went Wrong?
This sum was used to purchase 91,705.6 DJT. DJT is a relatively new token associated with Donald Trump, with a considerably lower market capitalization.
What a sad story!
This guy spent 2,500 $SOL($342.1K) to buy 91,705.6 $DJT but only got 4.91 $SOL($673) back when he sold it.
He lost $341.4K in less than 1 minute!https://t.co/jrL0ZGa76Dhttps://t.co/qICy7GZfmj pic.twitter.com/olr78X8snp
— Lookonchain (@lookonchain) June 18, 2024
The trade quantity is the key to the whole matter. Getting hold of that much DJT probably resulted in a lot of market slippage, which drove up the purchase price. This resulted in a dramatic outcome for the investor.
What happened was that the market dynamics reversed when the investor attempted to sell the acquired DJT. The low liquidity of DJT combined with the initial overpayment led to a fire sale situation. The user was only able to recoup 4.91 SOL tokens, a meager $673. This resulted in a loss of over $341,400 in less than a minute.
Reminder to Crypto Enthusiasts
While crypto investment has turned many investors into millionaires, this transaction serves as a reminder of the inherent risks involved in trading. To prevent such incidents from recurring, users should always research a token’s liquidity before making substantial purchases. A low market cap can lead to price swings for a token.
Also, large trades can impact the buying and selling price due to a lack of available buyers or sellers on the other side. Therefore, users should verify the details like the intended amount, before executing a trade.
The incident also aligns with concerns from industry leaders regarding the growth of the memecoin sector. Eddy Lazzarin, the CTO at a16z Crypto once noted that memecoins generally undermine the long-term vision, keeping the industry healthy.
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