March 28, 2024
Tellor Altcoin's 150% Price Swing Sparks Manipulation Worries
Altcoins News

Tellor Altcoin’s 150% Price Swing Sparks Manipulation Worries

In a whirlwind of activity, the lesser-known altcoin Tellor (TRB) experienced a meteoric rise of nearly 150%, soaring to an all-time high of $619, only to swiftly plummet to $136 within a mere 13 hours on December 31. The erratic trading behaviour caught the attention of the crypto community, sparking concerns and prompting investigations into the unusual price movements.

Etherscan data raised eyebrows as it revealed that the Tellor team transferred 4,211 TRB—equivalent to approximately $2.4 million at the time—to a Coinbase wallet at 8:41 pm UTC, coinciding with the price surge. The sudden and significant drop in Tellor’s value subsequently led to over $68 million in liquidations, according to CoinGlass data later cited by blockchain analytics services Lookonchain in a January 1 post on X (formerly Twitter).

Spot on Chain, a blockchain analytics platform, delved deeper into the situation, suggesting that 26% of the circulating supply of TRB was concentrated in just 20 “whale” wallets. These whales allegedly began accumulating TRB at prices around $15 and strategically deposited their holdings onto centralized exchanges, contributing to what appeared to be manipulated price movements.

Tellor’s utility token, TRB, serves as the fuel for the Tellor decentralized oracle network, akin to the functionality of Chainlink (LINK). The repercussions of Tellor’s volatility extended beyond its ecosystem, affecting decentralized perpetual trading protocols such as Synthetix (SNX) and Hyperliquid.

Synthetix founder Kain Warwick revealed in a January 1 post on X that Synthetix stakers suffered losses amounting to approximately $2 million. The losses were attributed to a failure in automated risk parameters within the decentralized protocol, which allegedly did not recognize the manipulated nature of TRB’s price movements, leading to abnormal price points.

Warwick pointed out that TRB had a $250,000 open interest cap that ballooned to $12.5 million during the price surge, emphasizing that risk controls were insufficient. He noted that several short positions were opened during the price spike, and with the dislocation of spot and perpetual prices, there was no arbitrage to balance the situation.

The Synthetix founder stressed the importance of robust risk management in decentralized exchanges (DEX) like Synthetix, asserting that risk controls must be intrinsic to the platform. He concluded that incidents like these should be seen as the cost of operating a decentralized exchange, highlighting the need for a proactive approach to risk management in the rapidly evolving world of decentralized finance (DeFi).

Image: Wikimedia Commons

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