DFL Liquidation Event Post-Mortem
Hello Tulip Farmers, we experienced a large scale liquidation event on the DFL-USDC Raydium leverage pair, which required backstopping with our insurance fund. Funds are safe and lending remains unaffected.
DFL-USDC was caught in a perfect storm where leveraged yield farming made up majority of the AMM liquidity. Prior to the liquidation event, TVL in the DFL pool on Tulip was approximately $14m, now reduced to $2m. With each large liquidation, AMM liquidity decreased drastically, which increased volatility.
With high volatility and large notional liquidations, the lending pool was found to be short $391,097.48, requiring backstop by insurance fund. The insurance fund balance prior to the event was $2,399,302.68 USDC. The balance is now $2,008,205.2 USDC.
This is the first instance where the insurance fund was utilized to backstop our lending pools. We will be conducting a review on our existing leveraged pairs and consider adjusting LTV ratios to better align risk to avoid a future incident.
We also took this chance to update our insurance fund multisig to a new version. The address can be found here.
