In what is an unexpected turn of events, the native token of Synapse (SYN) took a hit on September 5 after being traded for a significant price drop. The impetus was an unidentified liquidity provider who unloaded about 9 million SYN tokens and withdrew all stablecoin liquidity from the platform. Synapse functions as a cross-chain bridge protocol via Optimism technology, possessing a well-performing record with over 1.3 million users and a whopping $40 billion in volume.
The liquidity drop was confirmed by Synapse’s official X account and was credited to an unknown liquidity provider, emphasizing that it wasn’t the result of a security breach. An anonymous liquidity provider linked to Nima Capital , a chronic capital partner of the Synapse project, caught the crypto community’s attention later. Many have iterated that Nima Capital disregarded the terms of their liquidity provisioning agreement by pulling their support several months prematurely.
Further scrutiny insinuates that these actions could be seen as a ‘rug pull’ within the crypto community. Evidence displayed on Synapse’s governance forum revealed that according to their agreement, Nima Capital was obligated to provide approximately $40 million in stablecoin liquidity for one year, and in exchange, they were expected to receive 33% of the bridge and swap fees generated by the platform.
The sudden action by Nima Capital occurred eight months before the agreed proposal date and has led to suspicion within the crypto community. Following these unexpected events, Nima Capital’s website was taken down, ceasing their online presence. This has led many to infer that a VC ‘rug pull’ occurred. Rug pulls typically involve project creators or developers altering project code or suddenly discontinuing it once the native token reaches a specific price.
Contrarily, a rug pull executed by a venture capital firm is not common, drawing further interest and scan from the public eye. As the Synapse Bridge is an integral part of the DeFi landscape that enables cross-chain trades, it often becomes vulnerable to exploiters, despite its maintained security as per the project’s official account confirmation.
Following the substantial token dump, SYN faced a price drop of above 20%, hitting a several weeks low of $0.30 before it bounced back to around $0.36. The incident also led to a significant decline in total value locked-in, now at merely $6.42 million, a massive slump from its peak in early 2022. The user base has lowered, from 1.3 million to a meagre figure of 7.84 thousand, the selling activity triggering the decline post the news of the token dump.
Source: Cryptonews
