Polyhedra Network recently experienced a significant 83% price crash of its ZKJ token. The network attributes this drastic drop to a combination of factors, including coordinated on-chain liquidity attacks, substantial ZKJ token deposits by Wintermute into centralized exchanges, and subsequent cascading liquidations. This event wiped out approximately $500 million in market value.
ZKJ Token Plummets Amidst Market Turmoil
On Sunday, the ZKJ token, which had been trading near $2 since December 2024, plummeted to $0.32 from $1.92 within hours. This dramatic decline, exceeding 80%, led to a loss of roughly $500 million in market capitalization. As of the time of publication, the token's price had stabilized around $0.39.
Key Factors Behind the Price Crash
Polyhedra Network identified several critical elements contributing to the ZKJ price collapse:
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Coordinated Liquidity Attacks: Several wallets allegedly orchestrated a liquidity attack, specifically targeting the ZKJ/KOGE liquidity pool on PancakeSwap. This involved aggressive ZKJ sell-offs after withdrawals from the pool.
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Fragile Liquidity: The affected trading pairs, particularly ZKJ/KOGE, possessed fragile and imbalanced liquidity. This vulnerability allowed the sell pressure to extend into ZKJ's primary USDT pool, exacerbating the price drop.
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Wintermute Deposits: A specific Wintermute address deposited over 3.39 million ZKJ tokens into centralized exchanges around the time of the crash. Similar amounts were also deposited into on-chain, CEX-labeled deposit addresses.
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Cascading Liquidations: The combined effect of liquidity attacks and large deposits triggered cascading liquidations on centralized exchanges, further driving down the ZKJ price.
Polyhedra's Initial Investigation and Accusations
Polyhedra's initial investigation pointed to "abnormal on-chain transactions" on the ZKJ/KOGE trading pair. Tiancheng Xie, co-founder of Polyhedra, publicly stated that KOGE had "rugged all of us." KOGE is the governance token for the BNB48 Club within the Binance ecosystem. However, a Binance Square account linked to a KOGE team member denied any involvement in dumping the token.
Polyhedra suspects that the addresses involved in the liquidity attack coordinated a malicious attempt to remove critical market depth, especially from a pool with concentrated and fragile liquidity provisioning. The substantial token transfers by Wintermute coinciding with extreme market volatility further fueled these suspicions.
Sources
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