The price of Synapse (SYN), the native token of the decentralized finance (DeFi) cross-chain bridge, experienced a significant drop on September 5th. This occurred after an unknown liquidity provider on the platform dumped nearly 9 million SYN tokens and withdrew all stablecoin liquidity from the bridge.
Synapse Labs, the official X account for Synapse, acknowledged the liquidity rug created by the “unknown liquidity provider.” However, they clarified that there was no security breach of the protocol or bridge. They stated that they were investigating the unusual activity on the provider’s wallets and were working to get in touch with them for more information.
Further investigation revealed that the unknown liquidity provider was traced back to Nima Capital, which is one of the project’s long-term capital partners. This venture capital firm had received a grant from the project in exchange for locking $40 million worth of liquidity in SYN. Data from Etherscan indicated that the unknown whale who dumped the SYN tokens received 10 million SYN (equivalent to $3.4 million) from the “Synapse: Executor 2” wallet on April 5th. Currently, the wallet holds no SYN tokens.
The actions of Nima Capital were seen as a “VC rug pull,” as they withdrew their users’ funds just eight months before the agreed governance proposal. This became evident when the Nima Capital website went offline and the project’s X (formerly Twitter) account went dark online.
Rug pulls are a common form of scam in DeFi ecosystems, where the project creators or developers change the code or terminate the project after the native token’s price reaches a certain threshold. However, a rug pull by a venture capital firm is unusual and raises concerns within the DeFi community.
The impact of this rug pull on SYN’s price was significant, with the token falling over 20%. It reached a multi-week low of $0.30 before recovering above $0.35 later in the day. The volatility in the token’s price reflects the market’s reaction to such unexpected events.
DeFi bridges, like Synapse, enable interoperability between different protocols, making them an attractive target for exploiters. Some of the biggest DeFi hacks have occurred on these cross-chain bridge protocols. As a result, it is crucial for users and investors to exercise caution and conduct due diligence before engaging with such platforms.
In conclusion, the rug pull by the unknown liquidity provider, identified as Nima Capital, has caused a significant drop in the price of Synapse’s native token. The unexpected withdrawal of liquidity has raised concerns within the DeFi community, particularly due to the involvement of a venture capital firm. This incident highlights the need for users and investors to be vigilant and perform thorough research to mitigate risks in the rapidly evolving DeFi ecosystem.
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