Investors are suffering significant losses due to the collapse of the MANTRA (OM) Token. While analysts investigate the cause of the collapse, many questions remain.
BeInCrypto collaborates with industry experts to identify five key warning signs behind MANTRA's downfall and presents strategies for investors to avoid similar traps.
MANTRA (OM) Crash... What Investors Missed and How to Prevent Future Losses
On April 13th, BeInCrypto reported the 90% crash of OM. This collapse raised several concerns, and investors accused the team of manipulating a pump and dump scheme. Experts believe there were many signs of problems from the beginning.
However, many people overlooked the risks associated with the project.
1. MANTRA Warning Signs, OM Tokenomics
In 2024, the team changed OM's tokenomics after an October community vote. The token transitioned from an ERC20 token to a native L1 staking coin of the MANTRA Chain.
Additionally, the project adopted an inflation tokenomics model without a previous hard cap. As part of this transition, the total token supply increased to 1.7 billion.
[The rest of the translation follows the same professional and accurate approach, maintaining the original structure and meaning while translating to English.]"A valuation of $95 billion shouted instability compared to a TVL of $13 million," said Forest Bai, co-founder of Foresight Ventures.
In particular, several issues were raised about the airdrop. Jean Raussis called the airdrop a "chaos". He mentioned many problems such as delays, frequent changes in eligibility rules, and half of the participants being disqualified. Meanwhile, suspected bots were not removed.
"The airdrop disproportionately favored insiders and excluded true supporters, reflecting a lack of fairness," Phil Fogel emphasized again.
Criticism was further expanded as Fogel pointed out the team's involvement with suspicious groups and connections to suspicious Initial Coin Offerings (ICOs), raising questions about the project's credibility. Eric He also suggested that Mantra was previously involved with gambling platforms.
Strategies to Protect Yourself
Forest Bai emphasized the importance of verifying the project team's qualifications, reviewing the project roadmap, and monitoring on-chain activities to ensure transparency. He also advised investors to assess community engagement and regulatory compliance to determine the project's long-term viability.
Ming Wu also stressed the importance of distinguishing between real growth and artificially inflated indicators.
"It's crucial to differentiate between artificially inflated activity through incentives or airdrops and real growth. Unsustainable tactics like 'selling a dollar for 90 cents' can generate short-term indicators but do not reflect actual engagement," Wu told BeInCrypto.
Lastly, Wu recommended investigating the background of project team members to check if they have a history of fraudulent activities or suspicious businesses. This will ensure that investors can be sufficiently informed before participating in any project.
4. Whale Movements
As previously reported by BeInCrypto, a whale wallet believed to be associated with the Mantra team deposited 3.9 million OM tokens to the OKX exchange before the crash. Experts emphasized that this was not an isolated incident.
"The large OM transfer to exchanges (43.6 million tokens, approximately $227 million) was a major warning sign of a potential sell-off a few days ago," Forest Bai told BeInCrypto.
Ming Wu also explained that investors should pay attention to such large transfers, which often serve as warning signals. Analysts from CryptoQuant also explained what investors should be cautious about.
"The transfer of OM to exchanges reached $35 million in just one hour, which acted as a warning signal: transfers to exchanges are typically less than $8 million per hour (transfers to Binance are generally large considering the exchange's scale). The transfer to exchanges accounted for more than a third of total OM transfers, indicating a high volume of transfers to exchanges," CryptoQuant told BeInCrypto.
Strategies to Protect Yourself
CryptoQuant stated that investors should monitor token flows to exchanges, which could indicate increased price volatility in the near future.
Meanwhile, risk management advisor Eric He presented four strategies to stay updated on large transfers.
- Chain Exploration: Using tools like Arkham and Nansen, investors can track large transfers and monitor wallet activities.
- Setting Alerts: Platforms like Etherscan and Glassnode alert investors to abnormal market movements.
- Tracking Exchange Flows: Users should track large flows to centralized exchanges.
- Verifying Locks: Through Dune Analytics, investors can confirm whether team tokens are being released earlier than expected.
He also recommended focusing on market structure.
"The OM crash proved that market depth is non-negotiable: According to Kaiko data, 1% order book depth decreased by 74% before the crash. Always check liquidity indicators on platforms like Kaiko; if 1% depth is less than $500,000, it's a warning sign," Eric told BeInCrypto.
Additionally, Phil Fogel emphasized the importance of monitoring rumors or discussions about dumps on platforms like X (formerly Twitter). He stressed the need to analyze liquidity to assess whether the token can withstand selling pressure.
5. Centralized Exchange Involvement
After the incident, MANTRA's CEO JP Mullin quickly blamed centralized exchanges (CEX). He claimed that "reckless forced liquidations during low liquidity periods" triggered the incident, suggesting negligence or intentional positioning. However, Binance pointed to cross-exchange liquidations.
Interestingly, experts showed slight differences of opinion on how CEX contributed to the OM incident. Forest Bai argued that CEX liquidations during low liquidity periods triggered cascading sales, exacerbating the incident. Eric He also agreed with this view.
"CEX liquidations played a major role in the OM incident, acting as an accelerant. With thin liquidity—1% depth dropping from $600,000 to $147,000—forced liquidations triggered cascading liquidations. $74.7 million was wiped out in 24 hours," he mentioned.
However, Ming Wu called Mullin's explanation "just an excuse".
"Analyzing the open interest in the OM derivatives market, it was less than 0.1% of OM's market cap. Interestingly, the open interest in OM derivatives actually increased by 90% during the market collapse," Wu told BeInCrypto.
According to management, this challenges the idea that liquidation or forced liquidation caused the price drop. Instead, it indicates that as the price fell, traders and investors increased their short positions.
Strategies to Protect Oneself
While CEX intervention is controversial, experts mentioned key points of investor protection.
"Investors can limit leverage to avoid forced liquidation, choose platforms with transparent risk policies, monitor open positions for liquidation risk, and store assets in self-custody wallets to reduce CEX exposure," Forest Bai recommended.
Eric He also advised that investors should dynamically adjust leverage according to volatility to mitigate risks. When tools like ATR or Bollinger Bands signal volatility, exposure should be reduced.
He also recommended avoiding trading during low liquidity periods, such as UTC midnight, where slippage risk is highest.
The MANTRA (OM) collapse strongly reminds investors of the importance of due diligence and risk management in cryptocurrency investments. Investors can carefully evaluate tokenomics, monitor on-chain data, and diversify investments to minimize the risk of falling into similar traps.
With expert insights, these strategies will help investors make wiser and safer decisions in the cryptocurrency market.
