MATIC offers explanation for 70% drop in December
Just hours after the MATIC token dropped by 70% on 10 December, the cryptocurrency community on Twitter was abuzz with accusations of market manipulation and exit scams. Matic’s most recent attempt to calm down unhappy investors and skeptics came in the form of a blog post titled, “Matic Outreach Program: Clarifying the Recent Situation.”
The post described the drop as a “coordinated and premeditated attack,” one which accelerated the “rampant spread of FUD.” The post also asserted and reassured the community that the Matic team “played no role in the attack” and “were quick to regain control of the situation,” through its ‘Outreach Program.’ This involved multiple AMAs, interviews, and articles attempting to clarify the situation.
Matic’s blog post also explained that in the weeks leading up to the event, the token’s improving price performance had led to several exchanges enabling margin trading for the token. It said,
“Unfortunately, this made MATIC a prime target for manipulative whales looking to profit from margin trading.”
Additionally, the post said that the most likely reason for the drop was entities holding large MATIC positions dumping on the spot market, while simultaneously holding large margin short positions. Even a single large sell order could have triggered stop losses, the blog said, adding that if enough of them had been in place, it could have induced further selling.
“Once the price starts sliding down in such an event, it’s a cascading effect in terms of the activation of stop losses.”
Additionally, the post said that many people claimed to have seen huge short positions on exchanges offering MATIC Futures contracts, hours before the price of the token dropped on 10 December. Matic’s blog also claimed that since the attack took place during the early hours of the Indian market, the team was unable to respond immediately and actively deal with the situation, something which led to further spread of misinformation.