The dramatic collapse of Mantra’s token has sent shockwaves through the decentralized finance ecosystem, highlighting a vulnerability that often remains hidden until it’s too late: the illusion of liquidity. In the span of just a few days, the value of OM, Mantra’s native token, plunged catastrophically, wiping out $5 billion in market capitalization and leaving the project’s future under intense scrutiny.
According to a recent analysis by Kaiko, the sequence that led to the crash was triggered by a dangerous combination of low liquidity and long liquidations. The data shows a staggering collapse in market depth, falling from $290 million to less than half a million dollars. With no substantial buyers in sight to absorb the sell pressure, the market essentially unraveled in real-time. What followed was a cascade of liquidations, particularly on OKX, where $21 million in long positions were forcefully closed, amplifying the downward spiral.
The incident has prompted speculation about potential insider manipulation. Blockchain investigator Max Brown raised serious concerns about the token’s distribution, claiming that the project team controlled up to 90% of the supply in an effort to create an illusion of liquidity. If accurate, such concentration would have allowed a few actors to dominate market dynamics, misleading both investors and automated trading systems.
This theory is further echoed by OddEyeResearch, who pointed to suspicious wallet activity involving centralized exchanges and anonymous addresses. They believe these wallets are actually controlled by Mantra, and that the crash was set off when a member of the group “betrayed” the coordinated effort. Whether through a voluntary sell-off or forced liquidation, this breach triggered a domino effect under already fragile liquidity conditions, prompting widespread panic selling.
In response, Mantra CEO JP Mullin pointed the finger at forced liquidations on centralized exchanges, suggesting that these rapid sell-offs were the primary driver of the crash. However, the lack of on-chain transparency for CEX transactions means that verifying this claim is nearly impossible. The murkiness surrounding the causes of the collapse only adds to the growing mistrust within the community.
Despite a mild recovery, with OM trading at $0.8213 after dropping to a low of $0.4823, the token remains down nearly 90% from its recent high of $7.09. This stark fall from grace serves as a reminder that high valuations in DeFi can often mask deeper structural weaknesses.
Mantra’s unraveling may not be an isolated incident, but rather a preview of what could happen to other projects operating with thin liquidity and centralized control. The episode underscores a critical need for transparency, genuine decentralization, and robust liquidity mechanisms—features that are all too often sacrificed in the rush to capitalize on hype.
By Alejandro Silva Ramírez, Crypto Analyst & Columnist