Why Matic drops by a shocking 70% in one hour?

Prerna Sengupta
Prerna Sengupta is a writer for Thecoinrepublic. She is a law student at NALSAR University of Law, Hyderabad. She is interested in Tech Law and is especially keen on cryptocurrency, blockchain, and Bitcoin. She hopes to pursue this field in the future as a lawyer.
Matic drops by a shocking 70% in one hour

  • The token collapsed from $0.042 to $0.012 instantly.
  • The drop was quite unexpected because it was up 180% over a span of two weeks before the drop.
  • Multiple theories have surfaced about what could have possibly caused such a shocking drop.

The digital-token Matic dropped a staggering 70% in only one hour on December 10, making this one of the severest drops in crypto history. The token collapsed from $0.042 to $0.012 instantly leaving traders absolutely baffled. The dumped amount is roughly $60 million in terms of market cap.

This massive drop was somewhat unexpected because Matic had been performing very well prior to the drop. It was up 180% over a span of two weeks before the drop. The dramatic drop left the social media platform, Twitter in a frenzy with people questioning the management or wondering if it was an inside job.

What Cause this Massive Dump?

Nobody currently knows what caused this to happen. Many think that the founders of the project created this to occur by dumping their tokens on the market to which the COO of Matic replied by pleading innocence and saying that they had no role whatsoever in this drop.

who’s the culprit: Matic Team?

Binance CEO supported him by saying that the Matic team was not involved and that this was caused due to a cycle of panic amongst traders. Binance owns a majority and what some people have said is that for the first time there was margin trading on an illiquid Binance book after an airdrop and that  led to the whopping drop.

Whale Market Manipulation Strategy?

Another theory is that the top few Matic addresses hold 99 % of the supply and it could lead to manipulation if there is a coordinated liquidation. Other theories have also surfaced like how the issue is a case of pump and dump which is basically where a large buyer inflates the price over time before they offload their holdings or an exit scam where the developers of a digital asset sell all their holdings instantly and abandon their project.

Is it due to Panic selling ?

The theory that this was caused due to panic is not supported by many because of the lack of evidence and data to support the same. A Twitter user also highlighted Matic’s recent unlock/release schedule and added that the total amount sold was the same as the total amount liquidated. People seem more likely to believe that this was done by an insider and not that this was caused due to panic among investors.

Is IEO’s Prone to Pump and Dumps?

Another popular theory is altcoins like MATIC – and particularly those launched through IEOs – are especially inclined to increased volatitly, which fundamentally originates from the way that their issuers generally hold massive number of tokens, and that the vast majority of their exchanging volume originates from market making.

Regardless, this incident is something that could have happened to any token and as some traders have called it, is the stuff of dreams and nightmares. It, therefore, sets a precedent for all the other exchanges and the various stakeholders in the crypto market and enables everyone to prevent such an incident from repeating itself.

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