In response to its token's sudden 80% price drop, Polyhedra, a cryptocurrency protocol that achieved unicorn status last year, is implementing a token buyback plan and taking additional measures to restore trust within the crypto community. According to founder Tiancheng Xie, the current focus is on assessing the situation and preventing future financial attacks, stating, 'We will buy back more.' The ZKJ token plummeted from approximately $2 to 32 cents in under an hour on June 15, resulting in a loss of nearly $500 million in market capitalization. A preliminary post-mortem analysis identified several factors contributing to the collapse, including a coordinated liquidity attack on the ZKJ/KOGE pool on PancakeSwap, substantial ZKJ deposits by Wintermute into centralized exchanges, and a series of liquidations on CEXs like Bybit. On-chain data indicates that multiple addresses withdrew millions from the ZKJ/KOGE pool, with one address removing $4.3 million in liquidity provider tokens and dumping 1.57 million ZKJ, followed by others unloading nearly 1 million ZKJ each.
As the shallow KOGE/USDT pool was unable to absorb the sell pressure, the activity spilled over into the deeper ZKJ/USDT pool, triggering a liquidity spiral, according to the team. Additional pressure stemmed from a Wintermute-associated address that deposited over 3.39 million ZKJ into centralized exchanges during the crash, although Wintermute co-founder Evgeny Gaev stated that the team was selling spot and going long via ZKJ-tracked futures.
As spot prices collapsed, approximately $94 million in leveraged long positions were liquidated between 12:00 and 14:00 UTC, including multiple six-figure margin calls that exacerbated the crash. To mitigate the damage, Polyhedra's team injected around $30 million in USDT, USDC, and BNB as DEX liquidity, emphasizing that no ZKJ holdings belonging to the team were sold.
Polyhedra is conducting a thorough technical investigation and plans to launch a buyback initiative to offset the impact of the attack and deter similar future exploits. Token prices initially rose by over 50% following the release of the crash report but subsequently reversed, with prices now up only 1.3% over the past 24 hours.