A scandal has broken out in the cryptocurrency world today, centered on accusations of market manipulation involving Tellor, a protocol that provides oracles for smart contracts.
Alarm bells went off in the market after the price of its TRB token experienced a stunning 172% rise in a single day, followed by a rapid drop that erased those gains in less than an hour on December 31.
Data coming from Lookonchain shows how the price of Tellor Tributes (TRB) went from $231 to $630 in eight hours, only to plummet from $611 to $195 in less than an hour.
In the past 24 hours, $TRB soared to $600 and then plummeted to $137, causing $68M of assets to be liquidated, making it the most liquidated token.
— Lookonchain (@lookonchain) January 1, 2024
This event on Tellor was followed by a low of $120 and a current price of $184
The concern lies in the presence of a group of “whales” that accumulated a large amount of TRB tokens for months and then slowly deposited them on exchanges.
These moves generated a “pump and dump” cycle to liquidate their holdings, signaling possible market manipulation.
Concerns increased when it was discovered that Tellor’s team deposited $2.4 million in GRT on Coinbase during the peak of the price increase, suggesting their possible complicity in the alleged manipulation scheme.
The repercussions were not limited to Tellor: Synthetix v2, an established DeFi project, found itself with around $2 million in debt due to speculative actions during the TRB price rally.
This debt had a direct impact on Synthetix stakers.
Criticism also pointed to design decisions in Synthetix v2 that may have exacerbated the situation.
Setting open interest (OI) limits in TRB rather than in US dollar value exposed the protocol to significant risks during the TRB price surge.
Solutions are being discussed to avoid similar situations in the future, such as implementing dual limit systems and more robust volatility control mechanisms.
However, these improvements could be hindered due to the ongoing development of Synthetix v3.