Synapse (SYN), the cross-chain bridge protocol, has recently faced a significant setback as a major liquidity partner unexpectedly offloaded up to 9 million SYN tokens. The identity of the seller was confirmed as Nima Capital, a little-known cryptocurrency venture capital firm.
Meanwhile, the Synapse team confirmed that there was no security breach of the protocol or bridge and that they are looking into any unusual activity on their wallets in order to contact them.
A Synapse liquidity provider sold their SYN tokens and removed liquidity today. We're investigating unusual activity on their wallets and are working to get in touch with them. Will update once there is more info.
There was no security breach of the protocol or bridge.
— Synapse Labs (@SynapseProtocol) September 5, 2023
“Will update once there is more info.”
The “single-family” Nima Capital was the inaugural liquidity provider and a critical partner for Synapse, initially contributing $40 million in actively managed stablecoin liquidity for a 12-month term.
This move was a part of Synapse’s strategy to enhance its liquidity pools, yet it has now ended prematurely. This surprising sell-off came nearly eight months before the end of their term.
However, the effects of this action have been swift and severe, with SYN token prices plummeting by over 20%, hitting a low of $0.31 before recovering slightly to $0.33, according to data from Coinmarketcap. This marked a staggering 93% drop from its all-time high of $4.92, recorded in October 2021.
Synapse (SYN) TVL Takes a Hit
The consequences of this liquidity shock have extended beyond the token price. Data from DeFillama reveals that crypto investors swiftly began withdrawing their assets from the Synapse platform. Synapse’s Total Value Locked (TVL) experienced a significant hit, declining by 20% to $113 million.
Overall, this resulted in a staggering 90% drop in its TVL since January 2022, when it hit a peak of $1.2 billion.
— Wazz (@WazzCrypto) September 4, 2023
Adding intrigue to this story, Nima Capital’s website, nimacap.com, went offline at the time of this event, and their Twitter feed was set to “protected,” even restricting access to approved followers.
Nima has been an active participant in the cryptocurrency and DeFi sectors with a track record of 31 investments, as seen on Crunchbase. Notably, in April, they contributed $5 million to Teahouse Finance, marking one of their most recent investments.
In the last year or so, Nima Capital has also made strategic investments in various NFTs and crypto projects.