Synapse token, TVL slide following major liquidity provider sell-off
Synapse Labs, the main contributor to the cross-chain bridge Synapse (SYN), confirmed that an unnamed liquidity provider sold SYN tokens and removed liquidity from the bridge.
In a Sept. 5 statement on X (formerly Twitter), Synapse Labs continued that the incident was unrelated to any security breach on the bridge, adding that it was investigating the transactions.
Synapse is a cross-chain bridge protocol built on Optimism that claims to have $40 billion in volume and 1.3 million users. Last month, the protocol recorded $750 million in transaction volumes and integrated Coinbase-backed layer 2 network Base.
Who is the liquidity provider?
While Synapse Labs failed to provide the identity of the liquidity provider, several on-chain analysts have provided more detailed information about the incident.
Cryptocurrency analyst Lookonchain revealed that a whale had received 10 million SYN tokens from the Synapse Executor 2 wallet on April 5. This entity offloaded 9 million SYN tokens for 2.35 million USDC, effectively liquidating their SYN holdings.
Data analytics platform Scopescan further reported that Nima Capital might control the address that sold the tokens.
Nima Capital, an investment firm with a crypto-centric focus, boasts a diverse portfolio featuring notable companies such as Teahouse Finance and Fordefi. At the time of reporting, the firm’s official social media presence on X was protected, while its website was inaccessible.
SYN price and TVL tanks
The incident has negatively affected confidence in the bridge protocol, whose native token dumped by more than 20% to as low as $0.31 before recovering to $0.33, according to CryptoSlate’s data.
According to data from DeFillama, crypto investors have been withdrawing their assets from the platform, resulting in a significant drop in the total value of assets locked on the protocol. The total now stands at $113.24 million, a sharp decline from its peak of $1.2 billion in early 2022.