Polyhedra, a rapidly evolving crypto protocol that achieved unicorn status last year, is navigating turbulent waters. In the wake of a dramatic 80% plunge in the value of its native token, ZKJ, the company has unveiled a buyback plan to restore confidence within the crypto community. The collapse, occurring on June 15, wiped out nearly $500 million in market capitalization within the span of an hour.
The Anatomy of a Collapse
The initial shockwave was attributed to a coordinated liquidity attack on PancakeSwap’s ZKJ/KOGE pool. According to Polyhedra’s post-mortem released in the early hours of the Asian trading day, the attack was exacerbated by substantial deposits of ZKJ by market-making firm Wintermute into several centralized exchanges. The result? A cascade of liquidations on platforms such as Bybit. This incident comes at a time when PancakeSwap (CAKE) Leads Market Gains as Trading Volume Soars 88%, highlighting the volatile nature of decentralized exchanges.
On-chain data paints a vivid picture of the chaos. Several addresses aggressively drained the ZKJ/KOGE pool, with one address alone removing $4.3 million in liquidity provider tokens and offloading 1.57 million ZKJ. Others weren’t far behind, collectively unloading nearly a million ZKJ. The ensuing liquidity crunch in the KOGE/USDT pool triggered a spillover effect into the more robust ZKJ/USDT pool, spiraling the liquidity crisis further, according to Polyhedra’s analysis.
Wintermute, a key player in this narrative, reportedly deposited over 3.39 million ZKJ into centralized exchanges during the meltdown. However, Evgeny Gaevoy, Wintermute’s co-founder, clarified in an X post that the firm was hedging its positions by selling spot and taking long positions in ZKJ-tracked futures. Despite these strategic maneuvers, the plummet in spot prices resulted in the liquidation of approximately $94 million in leveraged long positions, including numerous six-figure margin calls.
A Community on Edge
In response to the freefall, Polyhedra’s team sprang into action, injecting around $30 million in USDT, USDC, and BNB to bolster DEX liquidity. Importantly, the team stressed that no ZKJ holdings from within the company were sold during this tumultuous period. Tiancheng Xie, Polyhedra’s founder, took to X on Tuesday, emphasizing the importance of understanding the current predicament and preventing future financial assaults. “We will buy back more,” Xie assured.
The announcement of a buyback plan initially buoyed token prices by over 50%, yet this optimism was short-lived. By the day’s end, prices had retraced, leaving ZKJ up a modest 1.3% over the past 24 hours.
Polyhedra’s forthcoming buyback initiative, part of a broader technical investigation, aims to mitigate the attack’s damage and deter similar exploits in the future. The crypto community remains watchful, gauging whether these measures will be sufficient to restore trust and stabilize the volatile ZKJ token. This situation echoes recent events in the crypto space, such as the Bitopro Confirms $11M Hack, Taiwan Crypto Exchange Says It Has Replenished Lost Funds, underscoring the ongoing security challenges faced by digital asset platforms.
Looking Ahead
While Polyhedra’s immediate actions demonstrate a proactive stance, the incident raises broader questions about the vulnerabilities inherent in decentralized finance (DeFi) platforms. Liquidity attacks, like the one witnessed, underscore the need for robust security protocols and vigilant monitoring of market dynamics.
As the crypto world digests these developments, the focus shifts to Polyhedra’s next moves. Will their buyback plan and technical audits be enough to reassure investors and stabilize the token? The coming weeks will be critical, as the company seeks to navigate these choppy waters and reaffirm its position as a resilient player in the ever-evolving DeFi landscape.
Source
This article is based on: Polyhedra Blames Liquidity Attacks for Sudden 80% Price Drop in ZKJ, Promises Buyback
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
