Data Platform Error Shows Bitcoin Crash To $5,400, Triggering DeFi Liquidation Wave

Pyth Network — a decentralized data service that feeds market data to decentralized applications (DApps) such as decentralized finance (DeFi) protocols — fed a Bitcoin BTC/USD price as low as $5,402 on Monday.

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What Happened: According to a Wednesday announcement, Pyth's Bitcoin price in United States dollars dipped as low as $5,402, causing several Solana SOL/USD DApps to liquidate positions based on the wrong data.

The project's team said the cause of the flash crash was "some programs relying on the aggregate price feed without using the confidence."

Solana-based DeFi protocol Bonfida FIDA/USD tweeted that its futures platform Audaces saw "a series of liquidation events" on its Bitcoin product, which was "unfortunately working as intended."

Two Pyth price data providers published a near-zero price for Bitcoin, and the price aggregation logic developed by the project's team overweighed those outliers. These data providers had their systems encounter problems with correctly handling decimal numbers.

Pyth's team said it is now working to fix the software in a way that will prevent the same thing from occurring again and creating enhanced documentation to ensure that the system is used correctly.

See Also: WHAT IS DEFI?

Pyth is an emerging player in the crypto space with backers such as crypto exchanges FTX and Bitstamp, cryptocurrency bank Galaxy Digital and crypto financial services provider Amber Group. Recently the data provider incurred in another major problem when the Solana network stopped working for many hours, bringing Pyth down with it.