The LEVER token experienced significant market volatility at approx. 04:45 UTC on Wednesday 12 June, decreasing up to 40% in a short span of two hours.
In order to provide clarity for the LEVER community, we have worked tirelessly with our market partners to investigate and uncover the possibilities behind this volatility. We offer up the findings from our investigations for our community to help users understand how the volatility had occurred.
No Security or Smart Contract Vulnerabilities
The first check in our investigation is whether there has been a security or token smart contract breach.
We have confirmed on all technical levels internally, along with our developer and audit partners, that the token contract is safe and was not manipulated.
The market volatility was therefore not due to any protocol or smart contract security breaches. This suggests that the market volatility was most likely caused by market-related actions.
Short Selling Manipulation The Most Probable Cause
Our investigation point to a speculative short selling attack that seeks to manipulate LEVER on Binance Futures as the most likely cause of the volatility.
In the days leading up to the sudden volatility, LEVER had exhibited strength and positive dynamics relative to BTC across all trading markets. We therefore dived deeper into the trading data to understand why the drop had occurred so suddenly.
To do this, the buy and sell statistics were analyzed for three trading venues where the volumes were the highest: (i) Binance Spot, (ii) Binance Futures, and (iii) Bithumb.
It was found that Binance Futures demonstrated completely different dynamics compared to Binance Spot and Bithumb.
Sell and buy volumes were comparable on Binance Spot and Bithumb, and number of buy transactions exceeded sell transactions in aggregate, which indicates that spot traders / holders were interacting naturally in a healthy and positive spot trading market.
In contrast, sell transactions dominated the Binance Futures market. Traders were only shorting, and very aggressively, on Binance Futures. This is observed in the buy/sell trading volumes between Binance Spot, Binance Futures and Bithumb shown below, which painted strikingly different volume profiles.
We therefore concluded that the market volatility is highly likely to be driven by a speculative large player or trading cartel seeking to manipulate the LEVER trading markets via Futures (which only require USDT margining to sell), and is not caused by holders exiting from the spot market.
While it is remains unknown why these traders / cartel had chose to target LEVER with their malicious trading actions, the unfortunate outcome is that they had succeeded, to the detriment to the LEVER community.
Mitigation and Community Support Plans
The above investigation findings have been shared with our exchange partners, who have access to more data (including KYC and account activity details), and they may take action against the perpetrators on their discretion. We hope that by doing so, we can minimize the impact from this incident, and prevent future incidents.
Notwithstanding this incident, we remain committed to building and delivering value to the LeverFi community. Rest assured that this will not slow down nor impact our building and protocol development efforts; this only spur us on to ship faster and better such that we can restore value for our users.
To achieve this goal, the development and launch of OmniZK will power the buyback of LEVER tokens from the transaction fees accumulated from the protocol utility.
Additionally, with over USD10 million raised over the past year to support protocol growth and development, a portion will be set aside to repurchase LEVER to bolster the token treasury.
We look forward to working alongside our community to push through this incident, and rise above and beyond.
LeverFi: Scaling Bitcoin and Global Web3 Ecosystems
Backed by world-class investors, LeverFi is a leading web3 innovation firm that continually reimagines the boundaries of decentralized finance. With its latest roadmap, LeverFi is set to break new ground and create new possibilities for Bitcoin and global web3 ecosystems.
Stay tuned for more updates as we continue to expand to more users globally, and deliver new innovations in decentralized finance by following us on our socials:
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