The recent collapse of OM at MANTRA has left the community confused. In a series of rapid price drops, $5.5 billion was wiped out. According to many analyses, this incident was caused by a trader manipulating two trading platforms.
This incident highlights the fragility of many token projects. Although the market capitalization seems very large, a small amount of liquidation has triggered a complete collapse.
Exploring the Collapse of OM
When the OM token of MANTRA collapsed at the beginning of this week, it left many unanswered questions. It caused allegations of fraud, and rumors of insider activity have been haunting the company since then.
According to a new analysis, the initial cause of the OM collapse was due to a single trader:
"This is due to an entity on Binance's perpetual market. That is what triggered the entire chain of events. The initial drop below $5 was triggered by a short position of around $1 million sold into the market. This caused over 5% price slippage in a few microseconds. That was the trigger. This seems intentional to me. They knew what they were doing," he said.
After triggering this initial anomaly, the OM trader continued to short sell over a five-second period, which drove the overall collapse. As these continuous short selling continued on Binance, the OKX spot market witnessed a near 20% price drop.
OM Trading Anomalies. Source: Traderview2Sellers Find Liquidation Escape
This strange behavior on OKX was caused by a large whale. A limit sell order allows sellers to specify the minimum price they are willing to sell a cryptoasset. The order will only be executed if the market price reaches or exceeds the limit price. Until then, the order remains open in the order book. This person unilaterally maintained a fixed price on OKX for over a minute, causing market makers and price difference bots to diverge from buying the asset despite the broader market selling off. In this way, the perpetrator was able to sell OM tokens while the collapse was occurring.
The problem is not that OM dropped in price due to a bad actor trying to cause a collapse. Instead, the problem is that a single entity could manipulate the market so thoroughly.
For an attack like this to succeed, OM's market capitalization must be much more fragile than predicted.
In other words, although OM's market capitalization is theoretically very high, only a relatively small investment is needed to collapse the RWA token like a house of cards. Some have even speculated that this trader may not have even attempted to cause a crisis.
Instead, they could be investors forced to sell due to loan terms or risk limits. A bit of manipulation could have led to a larger disaster.
