DeFi protocol Bancor announced today that it has temporarily discontinued its loss protection feature. Accordingly, the company aims to protect its liquidity providers (LPs) due to the extreme market conditions experienced in most markets. Additionally, the feature will become active again once the Bitcoin and altcoin markets stabilize.
However, the project has also asked the Bancor DAO to pause Temporary Loss Protection for rewards in liquidity pools. As it is known, the project aims to prevent the local token, BNT, from falling further. The project used BIP21 to disable trading and providing liquidity for compromised tokens on the network.
Bancor tries to stop altcoin BNT’s decline
Bancor Network published a blog post on June 20. The popular decentralized finance (DeFi) project has taken a number of steps to protect its platform and liquidity providers. Accordingly, the team reported that the Temporary Loss Protection feature will be paused temporarily. Thus, withdrawals will not be eligible for Temporary Loss Protection and deposits will not be accepted. However, trading will remain active and users will continue to earn returns. However, withdrawals will only be possible when IL protection is reactivated. “As our knowledge of current conditions increased, we observed anomalies in the data, if not manipulative behavior,” the project said. said.
Altcoin BNT rewards have started to be sold in abundance by various users recently. This was actually the main reason why Bancor paused IL protection. Generally, BNT rewards cost twice as much. It lowers the BNT token price, resulting in a permanent loss. This permanent loss is compensated to liquidity providers by additional BNT emissions. The bankruptcy of two large central companies caused costs to rise even more. These companies were liquidity providers that received BNT liquidity mining awards. However, they continue to liquidate their BNT positions to meet their obligations. Also, another unknown company opened a large short position in BNT token on an external exchange. As a result of the sale, the prices of the altcoin asset fell further.
BNT token price drops 65% in one week
Bancor Network’s network’s native cryptocurrency, BNT, is ramping up losses after massive liquidations. The altcoin wiped out 65% of its entire value in just one week. For this reason, the cryptocurrency is currently facing an intense risk of bankruptcy. However, BNT is trading 95 percent below its all-time high. Bancor ROI, on the other hand, is down 88% from its ATH. At the time of writing, the BNT token price is changing hands at $0.51, up about 6%. As Cryptokoin.com reported, the liquidation risks of Three Arrows Capital and Celsius caused a major crisis in the DeFi market. Companies liquidate their digital assets to pay back their lenders.
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