HarryPotterObamaSonic10Inu 2.0 (BITCOIN) slides after a series of sandwich attacks

A series of high-speed sandwich attacks have swayed the price of HarryPotterObamaSonic10Inu 2.0 (BITCOIN). The inherently volatile meme token became even more risky after an exploiter attacked other traders.

A sandwich attack led to another price slide for HarryPotterObamaSonic10Inu 2.0 (BITCOIN). The attack affected a relatively new token with only 657 holders.

The sandwich attack made use of the meme token’s liquidity pool, which was compromised by a logic flaw in its smart contract. The meme token is also causing confusion, as it spoofs the original BITCOIN token of the same ticker, but a different smart contract.

The relatively obscure token is trying to make its presence on social media, though still having a market cap under $1M. The token only started trading at the end of November, and has gone through several boom and bust cycles, before becoming the target of a hacker.

Unlocked liquidity allows the hacker to perform a trading attack

The hacker chose a token that was a version of the more high-profile meme with almost the same name and ticker. However, this token has much smaller liquidity pools.

The attack withdrew $243K, which was later mixed through TornadoCash. The draining of the liquidity affected the BITCOIN/WETH pair on Uniswap V1, while other pairs for the same asset are unaffected. All DEX pairs for this asset only contain limited liquidity, which is still unlocked and unsecured.

The unlocked liquidity allowed the hacker to gain access to the pools, in addition to the smart contract exploit. The attack added and removed liquidity at high frequency, causing price fluctuations. Together with the liquidity attack, the hacker also set up trading orders, benefitting from the price volatility.

Traders of the small and relatively illiquid token did not use sufficient MEV protection, and were vulnerable to additional sandwich trades. Not all pairs and tokens face the same level of MEV attacks, and traders also have different layers of protection. The attacked token saw mostly small-scale activity, and the hack exposed it to whale-sized trades.

The attack also raised questions on the original and larger BITCOIN meme token, which has a wider social media footprint. Despite the higher liquidity, the meme asset still trades with unlocked liquidity.

Even after the recent attack, memes continue to trade with unlocked pools, adding to their price volatility. The attack was relatively small compared to overall sniping and sandwich activity. However, the exploit underscored the risk of small, unsecured liquidity pools. The risk is even higher as the BITCOIN meme token is seen as one of the more accessible assets. Traders can be spoofed by both small and illiquid pairs, and tokens with an entirely different smart contract.

The recent hack shows that even for illiquid tokens with a relatively obscure profile, DEX trading allows for significant value extraction from traders. In this particular token, the hacker could deploy liquidity, making use of the low volumes and the lack of other whales and bots.

MEV bot attacks have slowed down for Ethereum, after peaking in the early days of DeFi. Not all assets and pools are equally affected, and bots often picked specific DEXs with unprotected users. Since 2022, more Ethereum users have turned to block builders for protection.

The tokens most often targeted by MEV attacks are WETH, USDC, and USDT, pointing to deploying sandwich bots on decentralized exchanges. The recent attack against a minor meme token suggests there may also be small-scale sandwich exploiters, looking for niche opportunities with fewer protections.

Ethereum may have lost up to $1.3B in value due to MEV and sandwich attacks. A recent report revealed the hidden costs of front-running trades. Even with protections, Ethereum users need extra spending to ensure the best trading outcome. In addition to open and visible sandwich attacks, Ethereum may be targeted by hidden sandwich trades, originating from otherwise safe private pools and block builders.

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