Fluid DEX Rebalancing Mechanism Sparks $19 Million in Losses

By: bitcoin ethereum news|2025/05/16 01:15:05
0
Share
copy
In the decentralized finance (DeFi) world, Fluid DEX — an emerging decentralized exchange — has drawn major attention. Liquidity providers (LPs) in its USDC-ETH pool have reported losses of up to $19 million caused by the platform’s rebalancing mechanism. This incident has sparked debate across the DeFi community and raised serious questions about transparency and accountability in protecting users. Ethereum Volatility Triggers Losses for Fluid DEX Fluid DEX launched in October 2024, when ETH traded around $4,400. The platform promised to generate liquidity of up to $39 for every $1 total value locked (TVL), attracting many LPs to provide liquidity to pools like USDC-ETH. However, since early 2025, ETH’s price dropped below $1,400 at one point and now hovers around $2,550. This sharp decline caused severe impermanent losses. According to Fluid’s report, the pool’s automated rebalancing mechanism — designed to optimize profits — became the primary source of these losses. “While the pool performs exceptionally well when prices stay within range (accruing strong fees for LPs), high volatility triggers rebalancing. This happens gradually through trades routed via the pool — from ~$3,800 to ~$1,560, and now ~$2,340. The rebalancing mechanism incurs realized losses for LPs that outweighed fee income,” Samyak Jain, co-founder of Fluid, said. Rebalancing mechanisms in AMMs like Fluid automatically adjust the pool’s asset ratio to maintain a balanced value based on mathematical formulas. This approach ensures stable liquidity and optimizes trading fee income, especially in high-volume pools. However, the risks are significant, particularly in volatile pools like USDC-ETH. When asset prices fluctuate heavily, they trigger impermanent loss. This means LPs may suffer losses compared to simply holding the assets outside the pool. Data from Dune Analytics shows a sharp drop in Fluid Vault’s TVL. As of mid-May 2025, cumulative losses for LPs reached $19 million. Tensions escalated when DeFi news provider DefiMoon publicly criticized Fluid and paid Key Opinion Leaders (KOLs) for failing to warn users about the rebalancing risks. DefiMoon claimed that Fluid heavily promoted the pool, promising high yields and even suggesting it could surpass Uniswap, one of the top DEXs. However, they said the platform barely mentioned the rebalancing risks, leaving many inexperienced LPs with heavy losses. “None of them ever mentioned rebalancing as a potential issue and I’m pretty sure neither of them put a single dollar of capital into this pool!” DefiMoon stated. Still, Samyak Jain defended the platform. He emphasized that Fluid’s stablecoin pools are still performing well and continue to generate strong returns for LPs. He also denied the $19 million figure, claiming the ETH-USDC pool only suffered “partial loss” due to general market volatility, not due to any flaw in Fluid itself. Fluid proposed a compensation plan to support affected LPs. It offered 500,000 FLUID tokens, worth $2.6 million, with a one-year vesting schedule. The Fluid DEX case serves as a warning to the DeFi community. Understanding risks is crucial before providing liquidity to any pool. Disclaimer In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated. Source: https://beincrypto.com/fluid-dex-reportedly-19-million-loss/

You may also like

Particle Founder: The entrepreneurial insights I have gained the most from in the past year

Stop lean startup, stop lightning entrepreneurship, and think carefully about what your product aspirations are.

Huang Renxun's latest podcast transcript: The future of Nvidia, the development of embodied intelligence and agents, the explosion of inference demand, and the public relations crisis of artificial intelligence

The competition in the future is not just about whose model is larger or whose computing power is stronger, but also about who understands the industry better, who can embed AI more deeply into real processes, and who can organize these capabilities into a runnable and scalable system.

OKX Ventures Research Report: AI Agent Economic Infrastructure Research Report (Part 1)

The existing infrastructure is hostile to the Agent economy. Agents can think and act independently at the "capability level," but at the "economic level," they are still locked into infrastructure designed for humans.

The migration of settlement rights: B18 and the institutional starting point of on-chain banks

In the traditional system, banks decide the settlement; in the on-chain system, code begins to take over this responsibility.

From Tencent and Circle: Looking at the Simple and Difficult Questions of Investment

The AI narrative continues to ferment, but the recent performance of related stocks varies, with some in the midst of summer and others as if in winter.

The second half of stablecoins no longer belongs to the crypto circle

What Coinbase doesn't want, Mastercard is eager to buy.

Popular coins

Latest Crypto News

Read more