Key Points to Consider
Why did Plasma’s (XPL) Value Plunge?
The main reason for the drop was a large influx of tokens being sent to exchanges as soon as they were unlocked. The trading firm Wintermute’s activity seemed to coincide with when XPL reached its peak price of $1.68.
What’s the Outlook for this Crypto?
While the lower prices attracted some big investors, overall market sentiment hasn’t turned positive yet.
The price of Plasma (XPL) has significantly decreased, falling by almost 50% after a major sell-off following its initial token release.
Currently, the total market value has fallen from $3 billion to $1.6 billion, impacting many investors who believed in its potential as a “stablecoin supercycle.”
For context, Plasma is a layer-1 blockchain focused on stablecoins and payments. It receives backing from prominent firms like Bitfinex, Tether, Bybit, and Peter Thiel’s Founders Fund.
Due to its notable backers and the buzz around stablecoins, XPL quickly became popular when it launched for public trading on September 25th.
Early investors saw returns as high as 19X, and the cryptocurrency’s value then skyrocketed 1,500% after being listed on exchanges, jumping from $0.10 to $1.68.
However, only four days later, the price experienced a sharp correction, erasing much of those initial gains.
Source: XPL/USDT, TradingView
Allegations of a ‘Team-Orchestrated Sell-Off’ Surface
Following the launch, XPL’s price plummeted by 46% in just four days, dropping from its high of $1.68 to below $1 at the time of this report.
As the price crashed, some community members accused the development team and market makers, particularly Wintermute, of coordinating the sell-off.
An analysis of these claims revealed that roughly 600 million tokens were transferred from the project’s official wallets to various cryptocurrency exchanges.
Reports indicate that Wintermute’s market-making activity significantly increased on the second day after XPL was released. This increase allegedly coincided with the coin hitting its peak value of $1.68, according to the analyst.
Source: X
With an average daily selling pressure of approximately 4 million XPL, the analyst suggested that the project team might be largely responsible for the sell-off.
According to the project’s documentation, around 8% of the total XPL supply (800,000,000 XPL) was released during the initial launch to “support DeFi activities.” The analyst believes that this released supply could be a contributing factor to the sell-off.
A user on social media described the price drop as “disappointing” for the Plasma team.
Large Investors Buy, Retail Investors Sell
Amidst the downturn, a large investor has been actively purchasing XPL at the discounted prices. This “whale” acquired nearly 30 million XPL, valued at $31.13 million, over the last three days.
However, there is no concrete indication that speculative trading interest is reversing. This suggests a strong recovery isn’t guaranteed. Open Interest has decreased from $1.86 billion to $1.20 billion in the last five days.
Source: CoinGlass
Furthermore, XPL experienced the highest amount of liquidations in the past four hours, with leveraged long positions suffering approximately $10 million in losses, contributing to a fragile market sentiment.
The recent price correction has reached a key area between $0.90 and $1.00, which corresponds to the golden ratio on the Fibonacci retracement tool. This level often acts as a support. However, falling below this level could lead to further price declines.