On the evening of June 15, the market stirred again, with the two major tokens ZKJ (Polyhedra Network) and KOGE (48 Club DAO) experiencing a dramatic flash crash within a few hours, evaporating over $600 million in market capitalization, sparking panic among investors and intense debate within the community. This incident exposed structural liquidity risks in the DeFi market and pushed the vulnerabilities of the Binance Alpha mechanism into the spotlight.
Event Progression: Market Capitalization Shrinks Overnight
Around 22:00 (JST) on June 15, the ZKJ and KOGE trading pairs experienced abnormal fluctuations on Binance and other major exchanges. The price of ZKJ plummeted from $1.98 to $0.32, with a 24-hour decline of up to 83.7%, hitting a low of $0.25, with market capitalization shrinking from $700 million to about $94 million, dropping to around 350th place.
KOGE also did not escape, with its price plummeting from $61 to $8.46, a decline of about 55.78%-60.75% (data varies slightly across platforms), with market capitalization shrinking to about $89.21 million. The flash crash of both tokens led to a total liquidation of about $210 million across the network, with over 70% of the liquidations coming from ZKJ contracts.
X platform user @wublockchain12 reported this severe fluctuation in real-time, stating that the two tokens 'halved' within an hour, with ZKJ down 60.56% and KOGE down 60.75%. Community investors expressed their despair, with some users lamenting: 'Investing $1,000 left me with $200 overnight, losing everything.' This flash crash not only severely damaged the confidence of holders but also raised questions about the governance and transparency of Polyhedra Network and 48 Club.
Cause Analysis: Liquidity Crisis and Large Holder Sell-offs
Multiple sources indicate that the core reason for this flash crash is the depletion of the KOGE/USDT liquidity pool, triggering a chain reaction that led to the simultaneous collapse of ZKJ and KOGE prices. Here’s a breakdown of the specific reasons:
Liquidity Depletion and Large Holder Withdrawals
On-chain data shows that on June 15, three major addresses (starting with 0x1A2…27599, 0x078…8bdE7, 0x6aD…e2EBb) executed large-scale liquidity withdrawals and sell-off operations: address 0x1A2…27599 withdrew 61,130 KOGE (about $3.7 million) and 273,017 ZKJ (about $530,000), and then quickly sold off. Address 0x078…8bdE7 withdrew 33,651 KOGE (about $2 million) and 709,203 ZKJ (about $1.4 million). Address 0x6aD…e2EBb received and sold 772,759 ZKJ (about $1.5 million).
These operations sold off more than $100 million worth of ZKJ and KOGE, directly leading to the depletion of the KOGE/USDT liquidity pool. Investors attempted to exchange KOGE for ZKJ to exit their positions, further exacerbating the selling pressure on ZKJ, creating a vicious cycle.
The 'Assistance' of Binance Alpha Mechanism
The Binance Alpha platform calculates points based on 'trading volume × liquidity', incentivizing short-term funds to flow into the ZKJ-KOGE trading pair, driving up trading volume. However, this mechanism also provides large holders with space for 'low-slippage swaps'. X user @ETH_APPLE pointed out that large holders create fake trading volume (wash trade) through KOGE-ZKJ swaps, selling off for profit after withdrawing funds at high prices.
The high trading volume incentive mechanism of Binance Alpha indirectly amplified the liquidity crisis.
The Shadow of Token Unlocking
According to Polyhedra Network's tokenomics, ZKJ will unlock 15.53 million new tokens on June 19, valued at approximately $30 million (estimated at the price before the flash crash). Concerns about the selling pressure from the unlock had already fermented in the market, and combined with the liquidity crisis, it triggered panic selling. X user @Nazarick_eth commented: 'Unlocking leads to crashing, the fate of high FDV tokens.'
Structural Risks in the DeFi Market
Both ZKJ and KOGE are high fully diluted valuation (FDV) tokens, relying on market makers for liquidity. Once large holders withdraw funds, the market lacks deep support, and prices can easily crash. The high correlation between ZKJ and KOGE trading pairs further amplifies the risk, and the collapse of the KOGE liquidity pool directly drags down ZKJ, forming a chain reaction.
Market and Community Response: Anger and Trust Crisis
Community sentiment shifted from shock to anger. User @ai_9684catheters bluntly stated: 'This is textbook harvesting, retail investors become cannon fodder.' Some investors pointed fingers at the project team, questioning the transparency of the June 14 statement from 48 Club (KOGE issuer) that 'tokens will be fully released, with no promise not to sell', arguing that it opened the green light for large holder sell-offs.
Polyhedra Network issued a statement on June 15 on X, stating that it had detected 'abnormal on-chain transactions' and was investigating and monitoring market dynamics, but did not provide specific solutions.
Binance issued an announcement on June 16, admitting that the flash crash was caused by 'large holder withdrawals and chain liquidations', and announced adjustments to the Alpha points rules starting from June 17, 00:00 (UTC), canceling the point calculation for trading volumes between Alpha tokens to curb similar incidents.
The community is not buying the responses from the project team and the exchange. X user @hualunjiejie stated: 'Exchanges and project teams are shirking responsibility, who will protect retail investors?' Some users have labeled this incident as a 'rug pull' or 'exit liquidity', suspecting collusion between the project team and large holders, although there is currently no conclusive evidence to support this accusation.
Background and Impact: DeFi Trust Crisis Escalates Again
This flash crash exposed multiple pain points in the DeFi market: the vulnerability of high FDV tokens, the coupling risk of trading pairs, and potential loopholes in incentive mechanisms. Analysts warn that if Polyhedra and 48 Club cannot rebuild trust through supplemental liquidity or transparent investigations, the prices of the two tokens may remain depressed for a long time, and the project's reputation will also be damaged.
Future Outlook: Unlocking Pressure and Repair Path
The token unlocking of ZKJ on June 19 is undoubtedly the focus of market attention. The addition of 15.53 million tokens may further exacerbate selling pressure, testing Polyhedra's crisis response capability. In the long run, DeFi projects need to learn from this incident, optimize liquidity management and tokenomics design to avoid similar crises from recurring.
For investors, the flash crash of ZKJ and KOGE is another warning from the high-risk crypto market. It is recommended to closely monitor the subsequent dynamics of the project team, on-chain data, and adjustments in exchange policies while maintaining a cautious investment attitude.
Related News: Class, Capital and Trendy Toys: Decoding Pop Mart's Unreplicable Business Empire
