Sunday, security firm PeckShield tweeted that GMX, a decentralized cryptocurrency exchange powered by Artibitrum and Avalanche, allegedly fell prey to a price manipulation hack worth around $565,000 on the AVAX/USD pair.
Although PeckShield removed the tweet, other members of the community reported similar behaviour. Supposedly, PeckShield tweeted, “It seems that $GMX on Avalanche was abused, leading in a $565,000 profit.”
The GMX dex resides on Arbitrum and Avalanche as a spot trade and perpetual contract platform. On the platform’s perpetual trading mode, traders may leverage up to 30x margin on futures contracts.
The little information available suggests that the AVAX/USD eternal pair was abused. In response, the dex has placed a $2 million limit on AVAX long perpetual futures and a $1 million cap on AVAX short perpetual futures. Per a tweet from the exchange, the incidence is under examination.
Over a week before the alleged vulnerability, the Twitter user @derpaderpederp speculated that GMX may be vulnerable to a price manipulation exploit on Ether (ETH) deals due to the exchange’s lack of exposure to price effect. The same logic applies to other assets, including AVAX in this instance, since the dex provides a small spread and nil price effect.
A spread is a difference between the purchase and sale price of an item. An exploiter might benefit from this price vector by initiating long positions on the dex and the same ones on a controlled exchange like Binance or FTX. To produce more earnings, short trades with a smaller asset value might provide greater returns.
Notably, the procedure may be repeated. However, such operations deplete the platform’s GLP liquidity token. At the time of publication, the dex has not published a comment on the possible vulnerability.
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