Synapse, the on-chain communication network, has experienced a sudden turnaround following the significant removal of liquidity from its protocol. Because the price of the altcoin project witnessed a significant drop in SYN. SYN prices have dropped over 20% in just a few hours. So, what’s behind this decline?
Liquidity provider sells altcoins
On September 5, Synapse Labs warned its users. He announced that a liquidity provider had a big sale in SYN tokens. He then warned that he was removing liquidity from the platform. The team at Synapse did not disclose which vendor was behind the crash. However, Wazz confirmed that the liquidity provider responsible for the sale is Nima Capital, a leading crypto venture capital firm. Synapse Labs sought to address concerns about a potential security breach and used the following statements:
We are investigating any unusual activity in their wallets and are actively working to contact them. We will provide updates as soon as we learn more.
A Synapse liquidity provider sold their SYN tokens and removed liquidity today. We're investigating unusual activity on their wallets and are working to get in touch with them. Will update once there is more info.
There was no security breach of the protocol or bridge.
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— Synapse Labs (@SynapseProtocol) September 5, 2023
Fortunately, Synapse users were relieved a little by announcing that there were no security breaches in the protocol or bridge. Notably, a crypto researcher known as “Spreek” has reported a series of suspicious transactions, including a dump of 9 million SYN altcoin projects in two quick transactions just one minute apart. At that time, the total value of these tokens was approximately $3.7 million. In addition, another researcher, “Wazz,” openly pointed to Nima Capital, expressing his distrust of the venture capital firm’s involvement. “Even venture capital firms are now rug-pulling,” he said, emphasizing the unexpected nature of the situation.
Even VCs are rugging now @NimaCapital dumped 9M $SYN and removed all stablecoin liquidity 8 months before the agreed gov proposal
Their site went offline and twitter protected too https://t.co/ShlYcZhFbz pic.twitter.com/1ncxP13XYV
— Wazz (@WazzCrypto) September 4, 2023
What is behind the sudden exit of Nima Capital?
What makes Nima Capital’s actions even more surprising is that they have been designated as the first liquidity partner of Synapse following an offer made in March. In this proposal, Nima Capital has committed to provide $40 million in actively managed stablecoin liquidity for a period of 12 months. However, it is seen that Nima Capital pulled the plug on this liquidity partnership eight months before the end of the agreed term. In addition, at the time of writing, Nima Capital’s website (nimacap.com) has gone offline. Twitter streams were set to “protected” and access was limited to approved followers only.
What other coins does the company have in its portfolio?
It has raised numerous questions about Nima Capital’s actions, intentions and impact on the crypto market. According to Crunchbase, the firm has made 31 investments in DeFi and crypto, and its most recent investments were in April, with Teahouse Finance raising $5 million in funding. Over the past year, Nima Capital has also invested in NFT developer Flow, Fordefi, Eversify Labs, OneOf, and Morpho Labs, but specific details about those investments are scarce. According to DeFiLlama, Synapse’s Total Locked Value (TVL) fell sharply by 20% after these developments. It is currently at the level of 113 million dollars.
Already battered by a broader bear market, the SYN price witnessed a significant 24% drop in the wake of the liquidity crisis. Before the sell-off, SYN was trading at $0.410 but quickly dropped to $0.309. At the time of writing these lines, SYN is trading at $0.339. Moreover, the altcoin is down 93% from its all-time high of $4.92 recorded in October 2021.
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