The native token of the ‘Russian Ethereum’ has leaped 99% in the last 30-days
Waves CEO Sasha Ivanov has taken to Twitter to hit back against claims of price manipulation after an article in which he gave an interview appeared to suggest Waves had somehow played a role in the recent price increase of WAVES. In the aftermath, Ivanov claimed that Alameda Research manipulated the WAVES price and organized campaigns to trigger panic selling of WAVES to benefit from a short position. Alameda denies the allegations.
- The founder of the Waves blockchain, Sasha Ivanov, made accusations regarding trading firm Alameda, which denied everything.
- A proposal has been submitted to the Waves governance forum that targets Alameda.
The back story
The article on Bloomberg implied that Waves’ recent price growth was somehow connected to the Russia-Ukraine war. It also mentioned a transaction that took place on the FTX Exchange the day before the conflict began on February 23.
In the article, Ivanov attributed WAVES’ intense growth to several anchor points. These include the launch of its US company, growing TVL, and new roadmap announcements. He further mentioned that Waves had distanced itself from any Russian ties more than a year ago. Furthermore, he’s of Ukrainian descent and not Russian, as many believe. It escalated further when a tweet from an onlooker on March 31 began gaining traction, triggering a withdrawal of liquidity from Vires finance.
The interviewer asked Ivanov if Waves themself had anything to do with the FTX transaction. However, since FTX has a wrapped version of the WAVES native token on the Ethereum network, Ivanov was dumbstruck by the question. He openly states he does not believe in or follow non-native tokens and only created the wrapped Ethereum version to get WAVES listed on FTX and circumnavigate a $1.5 million listing fee.
The plot thickens
This is when the popcorn comes out, and the whole debacle gets more interesting. Waves claim they never sell or lend WAVES, prompting Ivanov to look at who could borrow WAVES on Vires. The search began and what he found gave him the belief a higher force was at play. He claims an Alameda Research email account and wallet address started borrowing WAVES around March 20. They then sent it to Binance, presumingly to sell and decrease the price. This started around the same time as the FUD campaign started. FUD means Fear, Uncertainty, and Doubt, which we might translate as propaganda in the common tongue.
So what does all this mean? The account Ivanov linked to Alameda Research was the first to push the price on FTX, but after the position was closed with a profit, the subsequent short trade failed because the price kept going up. Ivanov claims that borrowing and FUD were needed to bring the price down to make the short profitable again. Ivanov ended his Twitter thread with the below.
What else could it be?
Alameda did reveal a clue as to what may have been happening while at the same time remaining out of the discussion. “People should look at funding rates for WAVES right now,” tweeted Alameda joint CEO Sam Trabucco.
To clarify what he means by that, funding rates are the amount of money paid out to traders who take long or short positions. Basically, if the bulk of participants are going long, then they pay a small amount of their open trades to those who are going short. When this happens, funding rates can increase and provide a potential source of money for those shorting the token—a widely used mechanism to keep the price of a perpetual token in line with the spot price.
In this incident, the funding rates were negative, so it’s conceivable that Alameda had taken a long position to take advantage of the high negative rates. However, a familiar strategy is to hedge that position by selling the token on the spot market. If Alameda were doing that, it would have enabled them to collect the yield from the funding rates, while minimizing their risk.
New governance proposal targets Alameda
Despite the back and forth mentioned above, a new governance proposal arrived on Waves. This proposal has support from Sasha Ivanov and puts Alameda in its crosshair. In an attempt to target Alameda’s funds, the proposal asks for the community to vote on a liquidation rate of 0.1% for all those who borrowed WAVES and USDN. USDN is a stablecoin that’s backed by the WAVES token on Vires Finance, which is the largest lending protocol on Waves.
The guts of the proposal mean that if it’s successfully passed, Alameda would have to buy up around 650,000 WAVES, or about $30 million worth, to maintain its position. For Ivanov, the proposal would be enough to liquidate those people shorting WAVES as a low liquidation rate of 0.1% will force short-sellers to cease trades. Moreover, the proposal means that anyone with a loan on Vires will have their positions closed instantly as soon as the price of WAVES moves even a little.
However, the Waves community is less than thrilled with the proposal. Most make their feelings known on the governance platform. The overriding consensus is that, if passed, the proposal will be harmful to users of Vires Finance who will take the majority of the hit of liquidations. A move that may also render Vires a dead protocol moving forward. Moreover, the community was quick to point out that the proposal goes against the ethos of decentralized finance.
From bad to worse
Amidst all this bad blood, and to make things worse for Waves, the dollar-backed Waves stablecoin USDN lost its peg to the US dollar on April 3 before crashing substantially on April 4. Falling at its lowest point to just $0.82, it has since recovered slightly, sitting at around $0.92 at writing, signaling recovery.
The proposal put forward by Waves is a primary driver of this failing peg, as uncertainty mounts around the network and its stablecoin. However, another huge reason appears to be an alteration made a few weeks ago restricting specific traders from making direct swaps between WAVES and USDN. Now, only traders that have staked large amounts of NSBT, Neutrino’s governance token, can swap tokens between themselves without a need for liquidity on exchanges.
The incident looks far from over and we will continue to bring you updates and the result of the governance proposal as it unfolds. For now, you can track and analyze Waves dapps on DappRadar, including Vires Finance.
The above does not constitute investment advice. The information given here is purely for informational purposes only. Please exercise due diligence and do your research. The writer holds positions in various cryptocurrencies, including BTC, ETH, and RADAR.