Cryptocurrency project Mantra saw its OM token rebound by nearly 200% Monday after suffering a catastrophic 90% price collapse over the weekend, following swift action from project leaders addressing widespread allegations of a fraudulent "rug pull" scheme.
What to Know:
- Mantra's OM token lost over $5 billion in market capitalization before rebounding from $0.37 to $1.10
- Co-founder JP Mullin denied allegations of fraudulent activity, blaming "reckless forced closures" by exchanges
- Analysts warn the recovery pattern resembles LUNA's failed rebound before its complete collapse in 2022
The weekend crash wiped out $5 billion in market value and triggered $75.9 million in futures liquidations before the token stabilized.
Co-founder JP Mullin attempted to restore investor confidence through a series of statements in the project's Telegram channel, categorically denying any malicious intent behind the price action.
"We are here and not going anywhere," Mullin wrote to concerned community members, providing a verification address to prove the team maintained its token holdings. He directly attributed the collapse to "reckless forced closures initiated by centralized exchanges" rather than team misconduct.
Market Speculation and Exchange Response
The reassurances temporarily stemmed the selling pressure that had decimated the token's value in a matter of hours.
Market observers had previously claimed the Mantra team, reportedly controlling 90% of the token supply, orchestrated the sell-off after suspicious transfers to exchanges immediately preceding the crash.
Cryptocurrency analyst Ed presented a different theory regarding the token's collapse. He alleged the Mantra team had used their substantial OM holdings as collateral to secure high-risk loans on at least one centralized exchange. According to his analysis, a sudden change in the platform's loan risk parameters triggered an automatic margin call, contributing to the token's precipitous decline.
Exchanges typically adjust loan risk parameters to manage market volatility and protect themselves from potential insolvency when collateral values fall rapidly. Several centralized exchanges, including OKX, have modified their parameters since Mantra implemented significant tokenomics changes in October 2024.
These controversial changes included doubling the total supply of OM tokens from approximately 889 million to 1.78 billion. The project simultaneously transitioned from a capped supply model to an uncapped, inflationary structure with an initial 8% annual inflation rate, according to cryptocurrency news source Wu Blockchain.
OKX CEO Star Xu characterized the situation as a "big scandal" in a public statement. He indicated the exchange would release detailed reports regarding the crash in the coming days, suggesting potential regulatory implications.
Technical Analysis and LUNA Comparison
Despite the impressive 200% recovery from its low of $0.37, technical analysts warn OM's rebound pattern bears striking similarities to Terra's LUNA token before its complete collapse in May 2022. The current price action exhibits classic "bull trap" characteristics that could precede further declines.
OM's price has fallen below the critical 50-week exponential moving average support near $3.25 and is currently testing resistance at the 200-week exponential moving average around $1.08.
These technical indicators suggest significant overhead resistance to any sustained recovery.
The token's weekly relative strength index has dropped to 33.31, signaling deteriorating momentum and increasing the probability of another breakdown. This technical setup strongly parallels LUNA's behavior following its initial crash, when it briefly recovered before failing to reclaim key moving averages and subsequently entering a deeper, prolonged downtrend.
Market sentiment remains overwhelmingly negative despite the temporary bounce. Technical analyst AmiCatCrypto issued a stark warning about OM's prospects, stating the token could plunge another 90% within a day despite having rallied for 100 days previously.
"If you ask me if bull market is over. Short answer. YES," she wrote in her assessment. "Any gains from this point is considered bounces."
Closing Thoughts
The Mantra token faces an uncertain future as investors weigh team explanations against technical indicators and market sentiment. While the immediate recovery has provided temporary relief, underlying concerns about tokenomics changes and collateralization practices continue to cast shadows over the project's long-term viability.