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Tellor altcoin’s bizarre 150% pump then fall spark concerns of manipulation

Tellor altcoin’s bizarre 150% pump then fall spark concerns of manipulation.

A wild day of trading of Tellor (TRB) on Dec. 31 wiped more than $68 million worth of leveraged positions, while a $2.4 million transfer from the Tellor team to Coinbase has sparked further concern.

A relatively unknown altcoin called Tellor (TRB) has been thrust into the community spotlight after surging nearly 150% to a new all-time high of $619 before plummeting back to $136 in just 13 hours on Dec. 31. 

The price of Tellor spiked then plunged amid allegations of market manipulation. Source: TradingView

The unusual trading activity of Tellor was further called into question after Etherscan data showed the Tellor team had transferred 4,211 TRB — worth roughly $2.4 million at the time — at around 8:41 pm UTC to a Coinbase wallet just as the price spiked.

Meanwhile, the sudden drop in the price of Tellor caused more than $68 million in liquidations, according to data from CoinGlass that was later cited by blockchain analytics services Lookonchain in a Jan. 1 post to X (formerly Twitter).

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.

We noticed that the #Tellor team deposited 4,211 $TRB($2.4M) after the price of $TRB skyrocketed.

Address:https://t.co/efHPXCiMiG pic.twitter.com/IBty2Wf2gI— Lookonchain (@lookonchain) January 1, 2024

 

Blockchain analytics platform Spot on Chain however said that the wild price swings could also be attributed to 95% of the circulating supply of TRB being distributed between just 20 “whale” wallets.

The small group of whale addresses began snapping up TRB at prices near $15 and has been gradually depositing their holdings to centralized exchanges amid seemingly artificial price movements to lock in higher profits, said Spot On Chain.

Decentralized derivatives protocols caught in the crossfire

Notably, several decentralized perpetual trading protocols such as Synthetix (SNX) and Hyperliquid were caught in the crossfire, with SNX stakers suffering low seven-figure losses following the sudden move in the price of TRB.

Alot of perp dexs are utterly rekt on this TRB pnd.

SNX and Hyperliquid both hit Who else? https://t.co/uf5Ju4DrmU— King (@0xgodking) December 31, 2023

In a Jan. 1 post to X (formerly Twitter) Synthetix founder Kain Warwick wrote that Synthetix stakers had realized roughly $2 million in losses.

This was reportedly due to a failure in the automated risk parameters on the decentralized protocol, which did not recognize that the price of TRB was allegedly being actively manipulated to produce abnormal price points.

What happened? TRB had a 250k USD open interest cap that ballooned to 12.5m as the price ran up the last few months. This should have been adjusted back down, but risk controls were lax, there was diffusion of responsibility. The Spartan Council is responsible for params though.— kain.eth (@kaiynne) January 1, 2024

Warwick wrote that TRB had a $250,000 open interest cap that ballooned to $12.5 million as the price increased over the past few months.

Notably, the open interest cap was set against TRB and not to a fixed notional USD amount — meaning that traders could continue to take outsized bets on decentralized derivatives contracts.

“Several short positions were opened as the price spiked today and with the dislocation of spot and perp prices there was no arb to balance it,” Warwick added.

Related: Vitalik Buterin reveals Ethereum game plan for 2024

“This should have been adjusted back down, but risk controls were lax, there was diffusion of responsibility. The Spartan Council is responsible for params though,” he wrote.

Ultimately, Warwick concluded that risk management on a decentralized perpetual exchange such as Synthetix must be “baked in” and couldn’t be resolved through traditional dispute resolution mechanisms such as courts.

“Either you build a robust decentralised trading venue and live by your risk controls or you are just larping as a DEX. I look at these kinds of incidents as the cost of being a dex.”

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