The value-locked (TVL) on Mantras RWA blockchain protocol has reached a yearly high, despite a price crash of OM by 90%. As of mid-April, Mantras TVL (in terms of OM) elevated to a noteworthy 4.21 million OM, which is approximately $3.24 million. This was an increase of over 500% from two days prior. This sharp increase in TVL came about concurrently with a drastic drop in OM prices. Centralized exchanges initiating reckless forced liquidations were pinpointed as the cause of the sell-off by the Mantra team.
Rise in TVL amidst Drastic Price Drop
A rising TVL typically signifies a greater amount of tokens being locked into the smart contracts of a protocol and this can occur through multiple means such as staking, liquidity pools, lending, or even yield farming for added network participation. Cryptocurrency analysts identified aggressive purchasing on various crypto exchanges during the OM price drop which totaled around an impressive $35 million in terms of OM purchases.
Despite the plummeting prices of OM by 90%, the simultaneous TVL surge and proactive buying tactics clearly indicate that some participants interpreted the collapse as an opportunity to purchase. The fact that millions of dollars were spent during the crash suggests that there might have been a strategic accumulation by whales, insiders, or opportunistic speculators hoping for a rebound in prices or farming incentives. By mid-April, the price of OM reached a high of $0.99, demonstrating an approximately 170% increase from the weekend lows.
Increasing TVL Raises Concerns
However, the increase in Mantras TVL also comes with certain red flags. Nearly 97% of Mantras TVL growth originated from Mantra Swap, the protocols native decentralized exchange, with the automated market-making pools accounting for 4.11 million OM in TVL. This makes it the chief catalyst behind the significant uptick.
A more decentralized ecosystem would encompass a wider capital distribution across multiple liquidity sources such as lending markets, staking platforms, derivatives, and more. Finally, Mantras fully diluted valuation (FDV) of approximately $1.88 billion in mid-April greatly surpasses the TVL of $3.24 million. This raises a potential risk of overvaluation.
With an insignificantly low 0.17% of its hypothetical value actively deployed in its ecosystem, the protocol exhibits a low capital efficiency, along with a limited real-world usage. This discrepancy suggests that the market cap is largely fueled by speculation, rather than adoption, and with a large bulk of tokens likely still locked, there is a high risk of future dilution as and when the vested tokens are unlocked.
Critiques of the Situation
Critiques of this situation include statements which highlight Mantras FDV as a potential risk to buyers of the OM dip. These comments remind interested parties of the inherent risks in every investment and trading move and emphasize the importance of conducting independent research for an informed decision-making process.
In conclusion, the rise in Mantras TVL demonstrates potential opportunities and risks alike for interested participants. It is of utmost importance to carefully analyze the situation, and make an informed decision regarding any potential investment. With volatility and uncertainties prevailing in the cryptocurrency market, regularity and careful study become all the more vital.
