Balancer $120M Exploit Shakes DeFi, Triggers 20% Bounty
October 2023 saw a major Balancer exploit that drained $120 million from its Composable Stable Pools. Attackers exploited a precision flaw in swap logic. By executing repeated small swaps, they built rounding errors that let amountOut exceed amountIn. This DeFi vulnerability drove USDC and USDT off-peg by up to 10%, triggering forced liquidations on lending platforms Euler and Morpho, adding about $50 million in sector losses. Weekly transaction volume on Balancer pools plunged by 70%. In response, Balancer paused affected CSPv6 pools, disabled factories, and launched a 20% recovery bounty for white hats. The team also coordinated with security partners to recover roughly $21 million in OS tokens. The incident underscores the need for stronger audits, multi-signature approvals, and robust smart contract tests under low-liquidity conditions. Traders should monitor stablecoin spreads and DeFi liquidity risks as markets digest the impact of the Balancer exploit.
Bearish
The Balancer exploit highlights systemic risks in DeFi, eroding trader confidence and driving stablecoin depegging. In the short term, liquidity providers and market makers may withdraw funds, leading to reduced volume and increased spreads. Forced liquidations on Euler and Morpho add selling pressure across DeFi tokens. This event can weigh on DeFi tokens like BAL and related assets, making market sentiment more cautious. Over the long term, protocol fixes and recovery bounties may restore some trust, but recurring vulnerabilities may limit inflows. Traders are likely to stay cautious until audits and multi-sig safeguards prove effective, keeping downward pressure on prices.