Replaying the OM crash: Single-handedly bringing down the entire RWA sector

Author: BITWU.ETH Source: X, @BTW0205

After a long time of pushing, I finally understood the whole process before and after the crash. This crash is not only a single event, but also a microcosm of the structural contradiction between "decentralized ideal" and "centralized reality".

MANTRA is a DeFi platform based on Cosmos SDK, focusing on the tokenization of real assets (RWA), and the native token $OM has increased 500 times in one year.

1. Timeline of the plunge

- On March 20, community users monitored that a large OM address withdrew coins and transferred them to the trading platform. There were rumors that OM had completed several OTC transactions with large discounts.

- Subsequently, many large OM users dumped the market, the price of the currency continued to fall, many OTC buyers were trapped, and the community panic spread, and began to rush to run.

- In the early morning of April 14, the price of $OM plummeted from 6.2u to 0.4u, a drop of more than 90%, and the market value evaporated by 5.5 billion US dollars in 2 hours.

- On-chain data shows that before the OM crash, at least 17 addresses transferred a total of 43.6 million OM to the exchange, of which 2 addresses were associated with strategic investor Laser Digital. (Speculation of selling)

- The MANTRA team denied "running away", saying that the crash was caused by "other (CEX) improper forced liquidation during low liquidity hours (early morning in Asia)", and suspected negligence or market manipulation by the exchange.

At the same time, it emphasized that the tokens are still in a locked state and no team or core investors are involved in selling.

On-chain data also shows that there were a large number of liquidation orders during the crash, resulting in chain selling, and insufficient market depth exacerbated the decline.

2. What problems are reflected in the OM incident?

1) There is actually a power game between the project party and CEX

A deep-seated contradiction is that CEX is both a liquidity provider and a potential conflict of interest party. For example, the exchange may obtain commission income through liquidation without being responsible for the project ecosystem.

MANTRA has repeatedly hinted that the project party lacks actual constraints on CEX and accused CEX of abusing its discretion.

CEX allows liquidation during inactive hours, which essentially transfers risks to retail investors.

This is like suddenly closing all emergency lanes on a highway at 3 a.m., and any car that breaks down will cause a hundred cars to rear-end.

2) "Valuation trap" of high FDV and low circulation projects

OM's FDV/TVL ratio is as high as 730 times, far exceeding the healthy level of the industry (usually less than 50 times).

This extremely unhealthy indicator shows that OM's market value far exceeds the actual value support and is easy to be shorted or liquidated. The smart money that was previously questioned may have arranged bearish + shorting + liquidation to counter-kill, waiting for the emotional point to explode, which is indeed consistent with the on-chain data.

Through locking positions to create a false illusion of scarcity, attract speculative funds to push up the market value, and eventually be taken over by retail investors.

3. What should we be wary of?

Under the plunge, the project party, CEX, and market makers all tried to shirk responsibility, but the three of them are all sharing the interests of listing coins. There is a potential for collusion in the interest chain. Is it possible to jointly control the market and strangle retail investors?

The dispersion of responsibility is itself the best breeding ground for market manipulation.

CEX actually controls the pricing power of tokens by controlling liquidity and liquidation rules. Liquidity is power. Should the risk control mechanism be improved (such as dynamically adjusting the liquidation threshold) to avoid regulatory vacuum to the greatest extent?

In this case, retail investors have a natural information disadvantage. The project party should also think about what to do to avoid over-reliance on centralized liquidity.

Highly valued projects that rely on "unlocking expectations" and "ecological blueprints" will collapse much faster than traditional financial assets once they encounter black swan events.

The narrative bubble will eventually burst. From the perspective of ourselves, there are only two points:

1. Be vigilant against the "FDV myth" and return to fundamental analysis. The real value should be based on protocol revenue and user growth, not paper valuation.

2. Don't hold high leverage positions during low liquidity periods, and you will die more slowly.