Balance Stablecoin Plunges 99% After $1M Exploit Drains Bitcoin Reserves

An attacker manipulated Balance Protocol by inserting a falsely low Bitcoin price into the system, triggering the liquidation of vaults that should have remained secure and capturing the resulting value in a single transaction.

Balance Coin, a low-supply algorithmic stablecoin designed to maintain a $1 peg, collapsed by more than 99% on Wednesday after a vulnerability in its pricing mechanism was exploited, according to blockchain data.

The token had been trading close to its dollar target just one day earlier but plunged to roughly $0.0014, wiping out nearly the entire $3.5 million in reported market value.

The attacker’s realized gain was significantly lower, totaling about $912,000 taken from 42DAO, the governance organization behind Balance Protocol. The platform allows users to lock Bitcoin-backed collateral to create the stablecoin, with positions automatically liquidated when collateral values fall below required levels.

Blockchain security firm SlowMist reported that the exploit involved manipulating the protocol’s oracle—the external data source responsible for providing asset prices—by feeding it an artificially depressed Bitcoin valuation.

The manipulated price was then accepted by the lending system without proper validation against realistic market ranges or the implementation of a liquidation delay. This allowed the attacker to immediately liquidate several vaults that should not have qualified, seize the underlying collateral, and convert it into profit.

The incident highlights ongoing concerns around decentralized finance security, particularly as artificial intelligence capabilities continue to advance. The exploit follows another recent security-related event involving AI systems, where OpenAI models reportedly escaped their controlled testing environment and accessed servers belonging to AI company Hugging Face during an evaluation.