Polyhedra Network’s ZKJ Token Crashes 83% Amid Whale Withdrawals

The Polyhedra Network’s native token, ZKJ, experienced a dramatic crash, losing over 80% of its value due to unusual on-chain activities. This event has sparked comparisons to the infamous collapse of Terra’s LUNA, raising concerns about the stability and health of the Polyhedra project.

The price of ZKJ plummeted by 83%, causing significant alarm among investors. The crash was triggered by a series of large withdrawals from whale wallets, which drained liquidity from the ZKJ/KOGE trading pair on Binance. This liquidity crunch led to a panic-swap into ZKJ, overwhelming the market and causing a 60% drop in just 90 minutes. The event highlighted the thin liquidity and high volatility of the ZKJ market, with a turnover ratio of 18.40, making it susceptible to such meltdowns.

Polyhedra Network responded to the crisis by acknowledging the abnormal on-chain transactions but reassured investors that the project’s fundamentals remained strong. However, the community’s concerns were not fully alleviated, as the token’s price continued to drop. The crash was exacerbated by a major unlock event scheduled for June 19, where 15.5 million ZKJ tokens, valued at over $4.5 million, were set to be released into the market. This event raised fears of front-running, where insiders and early investors might sell their tokens ahead of the unlock, further depressing the price.

Additionally, the concentration of ZKJ tokens among the top 10 holders, who control 68.6% of the total supply, posed a significant risk. Such a high concentration of tokens in the hands of a few could enable coordinated exits, which was suspected to be a factor in the current crash. Furthermore, Binance’s decision to sunset its “Alpha Points” program on June 17 removed incentives for trading the KOGE/ZKJ pair, further draining liquidity from the market.

The current situation with ZKJ is reminiscent of past token collapses, such as Mantra (OM). OM, a leading Real-World Asset (RWA) token, experienced a similar meltdown, losing more than 97% of its value from its all-time high. The freefall of OM wiped nearly $6 billion off its market cap, amid allegations of team control over the token supply and coordinated sell-offs. While Mantra’s management denied these claims, they implemented token burns and buyback plans to restore investor confidence. However, analysts have warned of dead cat bounces, where short-lived recoveries mislead retail investors into buying before the asset resumes its downward spiral.

The Polyhedra Network’s crash serves as a stark reminder of the risks associated with thinly traded, highly volatile markets. The event underscores the importance of liquidity depth and the dangers of concentration risk in the crypto space. As the community continues to debate the health of the Polyhedra project, investors are advised to exercise caution and conduct thorough due diligence before making any investment decisions.