Now, Mantra and its market makers are under a magnifying glass. There are allegations that they falsely inflated the liquidity in their OM token, deceiving investors on its market cap and trading volume. The ruse took advantage of validation loopholes on CoinGecko and CoinMarketCap. This caused a massive crash in the token’s value when one of the biggest holders attempted to sell their position. The unintended consequences unceremoniously erased close to $100 billion in market cap. It further exposed the asset’s lack of deep trading support, raising questions about data reporting practices across the crypto sector.
Allegations of Liquidity Manipulation
Mantra, in concert with their market makers, supposedly faked trading volume through wash trading on selected pairings of the OM token. This tactic was predicated on taking advantage of holes in the validation procedures of popular crypto data aggregators, such as CoinGecko and CoinMarketCap. By artificially inflating the token’s circulating supply and trading volume, OM gave the impression of being a top-25 asset by market cap.
In reality, under 1% of the OM token supply was really liquid. This gap between expected and realized liquidity produced the mirage of a more active market than actually was. The purported manipulation was designed to mislead investors and pump the token’s appearance value.
The Collapse and Its Aftermath
The imagined liquidity of OM evaporated almost overnight when a whale decided to sell their tokens. Its value evaporated by 90% in just 90 minutes, wiping out the vast majority of invested funds. The incident wiped out billions in market cap, exposing the asset’s previously touted trading depth as a mirage.
For example, OM’s listing on major exchanges such as Binance and Coinbase increased the effects of the crisis in liquidity due to. Many were surprised by the rapid price decline, leading to questions surrounding exchanges’ know-your-customer and due diligence processes. It further underscored the dangers of allowing listings of tokens with dubious liquidity. The kerfuffle was covered in depth on “The Chopping Block” podcast, adding to the outrage.
Calls for Greater Transparency
The subsequent collapse of OM has raised acute alarms about their liquidity practices. The above situation has placed data reporting standards in the crypto industry back under the microscope. Now industry figures are campaigning for a national similar requirement. They require all market-making agreements to be publicly available before any token can ever be listed on major exchanges. This common sense measure would improve transparency in order to avoid future occurrences of liquidity manipulation like this one.
The controversial incident has already set off a robust conversation. It’s time to demand better validation processes from data aggregators such as CoinGecko and CoinMarketCap. Implementation of stricter standards for how circulating supply and trading volume can be reported is necessary to provide a truthful and complete picture of the market. Our goal is to protect investors from metrics that are misleading and artificially inflated. We want to help improve confidence in the crypto market.
