Original author: ChandlerZ, Foresight News
On July 9, the Binance Alpha project saw another familiar flash crash. In less than 10 minutes, the star token BR in the recent Binance Alpha project plummeted from a high of 0.129 USDT to 0.053 USDT, and the price was instantly cut in half.
The crash can be described as clean and neat. According to @ai_9684 xtpa monitoring, the OKX liquidity section shows that before the flash crash, BRs trading pool liquidity remained stable at a high level, exceeding $60 million at one point. However, the outbreak of the incident was concentrated in just 100 seconds, with a total of 26 addresses almost simultaneously withdrawing $47.59 million in liquidity. Immediately afterwards, 16 addresses initiated a high-value token sell-off, including 3 million-dollar addresses and 13 $500,000 addresses. The centralized selling pressure instantly broke through the liquidity, causing the coin price to fall like a waterfall. BRs liquidity currently only has $14.56 million.
The following are the top 5 major dumping addresses
0x00E0E2225E48e40ac7A1C5C48C3359325C7F41c3
0x20c375580C4BD0DA36aec0c55406fa645F964FBd
0x63293340bb17D9bc0f66f1956a810f7BFC7c857B
0x58e837F8F9C1aCfE618AdbBa95314BE2ab55d19F
0x31A256E01900f93831361dF928EB32F83A6Af40E
Who is crashing the market?
According to the analysis, this crash does not look like the project owners behavior. First of all, the motivation. With the precedent of ZKJs collapse, it is too blatant to do this. I personally think that this large amount of volume is for the purpose of closing a contract/spot. Secondly, the data. The project owners main liquidity address 0x5f6f70821362376928a67b91fa2179683fe48de7 currently still holds 4.685 million US dollars of liquidity. The last operation was on July 7, and there was indeed no operation during the crash.
The three main addresses for dumping the market at the million-dollar level were all newly created two weeks ago. They started to build large BR positions directly after withdrawing funds from the exchange between June 24 and June 28. Their intentions were obvious and their funding sources were single.
The TOP 4 dumping address 0x58e837F8F9C1aCfE618AdbBa95314BE2ab55d19F has relatively more information. The source of funds can be traced back to 2017. It has interacted with old exchanges such as Yunbi/Zhongbi/Liqui/YoBit, and is a complete OG.
The means used are not much different from the last ZKJ crash, which is instant withdrawal of liquidity + large-scale market crash + cooperation of multiple addresses. However, it is still very difficult to investigate, and the sources of funds for the main addresses are very single.
Lessons from the ZKJ flash crash
In fact, such operations have long been traceable. The flash crash of ZKJ can be regarded as a precedent for the current round of BR crash. Just less than a month ago, on June 15, the ZKJ token also plummeted by more than 80% in a short period of time. According to the preliminary investigation report released by Polyhedra afterwards, the flash crash of ZKJ was caused by multiple addresses cooperating to withdraw large amounts of liquidity from PancakeSwap V3 and quickly smashed the market. This wave of on-chain selling pressure directly triggered the forced liquidation mechanism on centralized exchanges. In addition, Wintermute transferred 3.39 million ZKJ to CEX in a very short period of time, further exacerbating market panic and ultimately causing nearly $94 million in forced liquidation. What is more noteworthy is that the flash crash of ZKJ also formed a market structure with highly concentrated liquidity and no lock-in under the Binance Alpha incentive mechanism. These highly similar features almost overlap on the entire chain of the BR flash crash.
At present, the BR project party stated that the project party has not withdrawn liquidity, and has made the liquidity address public. It will not withdraw liquidity in the future and hopes that users will remain rational. At the same time, it pointed out that in order to further support users who trade in the PancakeSwap BR/USDT trading pool, a special airdrop plan will be provided for PancakeSwap BR/USDT trading users. During periods of drastic price fluctuations, if users have a significant price difference due to market fluctuations or slippage, they will be eligible for airdrop compensation. The specific rules and distribution plan of the airdrop will be announced and completed in the next few days.
Although the project owner may not have personally participated in the project, the problem of the mechanism itself is difficult to avoid. BR is one of the score-brushing tokens in the Binance Alpha project. The project owner attracts retail investors to provide liquidity and participate in the Alpha activity points competition by increasing the volume of points.
On June 25, on-chain data showed that BR has become the most traded token on Binance Alpha, with a 24-hour trading volume of $238 million. The address starting with 0x 9 bd, one of the main addresses suspected to be Bedrocks official LP, has invested a net of 50 million BR (about $4 million) to provide liquidity since June 19, including selling 41.436 million tokens worth $3.298 million at an average price of $0.07959 on the chain 5 hours ago. Subsequently, the address added 9.27 million BR and 3.427 million USDT bilateral liquidity to Pancake, generating $5,412 in fees within five hours.
Binance Alpha liquidity mechanism is questioned again
The communitys reaction to such incidents is also becoming increasingly intense. Crypto OG @BroLeonAus quickly posted a post after BR plummeted, pointing out that the risks of this type of brushing + pool absorption model have long been traceable. As early as the early days of BR and AB projects, they were observed to use linear K-lines, low transaction fees, and continuous guidance of liquidity to join the behavior characteristics, with typical brushing points and pool absorption tendencies. Now both of them have shown signs of flash crashes almost at the same time, and their words have come true.
In his opinion, the current points calculation rules used by Binance Alpha mechanism have obvious defects, which indirectly induces project owners to obtain platform exposure and rewards by creating superficial activity. Under this design, it is only necessary to create the illusion of deep liquidity, stable trend, and low fees on the chain to attract a large number of retail investors to participate as LPs and form liquidity accumulation. Project owners only need to lay nests and wait. Once the conditions are ripe, they can quickly withdraw liquidity and realize shipments, and ordinary users will become the final receivers.
BroLeon revealed that the Bedrock team had communicated with him last week about cooperation in publicity and promotion. He clearly proposed risk control suggestions and required third-party locking of the projects liquidity to ensure user safety. However, the other party did not give a clear response, and the cooperation was therefore not promoted. He emphasized that although there is no conclusive evidence that the BR project was directly involved in the crash, the Binance Wallet team was more responsible for turning a deaf ear to the huge risks and loopholes in this rule.
The platform originally wanted to benefit retail investors, but the actual situation turned out to be that the project party took advantage of the mechanism loopholes to harvest retail investors and in turn caused negative emotions towards the platform. Such a result obviously violated the original intention. In the current DeFi market, any incentive mechanism that cannot constrain its abuse boundaries may become a cash machine for speculators. Alpha was once regarded as Binances active exploration of the on-chain liquidity ecosystem, aiming to use platform incentives to encourage more users to participate in on-chain transactions and increase the activity and dispersion of tokens.
But it seems that the original design of this model has been gradually alienated. The incentive mechanism is not linked to lock-up and real liquidity, which leads to the rampant volume-washing behavior; project owners or short-term arbitrageurs do not need to bear too much cost to induce the market to form a superficial prosperity, and finally complete a net in the absence of review and constraints. If there is no change, it may be difficult to prevent the next flash crash by relying solely on post-event compensation or explanation.
