After a 354% surge, $CYBER: Upbit premium, mistaken proposal, market manipulation, how should investors respond?

The decentralized social protocol CyberConnect token $CYBER surged by 354% in four days, only to halve within an hour due to a mistaken proposal. Why does the Korean exchange Upbit have such astonishing premiums? What did the two market makers DWF Labs and Wintermute do? And how can investors avoid losses? This article will analyze each of these questions.

The Reasons for the Premium of $CYBER and the Team's Response

Background: $CYBER surged 150% in two days! Is Upbit holding 33% of the circulating supply and is market maker DWF manipulating?

Low Circulating Supply Makes Market Manipulation Easier

According to CyberConnect official data, $CYBER had an initial circulating supply of only about 11.03 million tokens, allocated to Ethereum, Optimism, and BNBChain networks.

During the initial launch on Binance's Launchpool, $CYBER did not receive much attention. The hype only started when South Korea's largest exchange, Upbit, began trading CYBER on August 22.

The reason for the premium is that Upbit only supports Ethereum network deposits and withdrawals. With a shortage of liquidity in that network, it caused a staggering premium between Upbit and other CEXs.

Reportedly, $CYBER surged up to 120% within four days, with prices reaching $37 at one point; however, Binance only had it at $16.2.

It is evident that there is a significant arbitrage opportunity between the two platforms. Arbitrageurs have been buying $CYBER from various exchanges and transferring them to Upbit. At one point, a wallet held up to 3.947 million $CYBER, even exceeding one-third of the total circulating supply.

Voting Drama: Unlocking Almost All Tokens

On September 2, the CyberConnect team, due to the lack of cross-chain bridges for the current tokens issued, indirectly resulting in significant premiums between exchanges, urgently submitted the "CP-1" proposal with a deadline to end the vote within 12 hours, aiming to balance liquidity by unlocking some tokens.

However, upon closer inspection, the proposal would unlock 10.88 million $CYBER, which is an extremely significant amount considering the current circulating supply of only 11.03 million tokens.

Predictably, as investors panicked and sold off, the price of $CYBER plummeted by 66% within an hour on Upbit and 25% on Binance.

Surprisingly, shortly after the end of the proposal vote, the CyberConnect team promptly released a statement, stating that the unlocking amount should have been 1.08 million tokens, claiming that the proposal would be rejected due to obvious data errors and clarifying in the subsequent post that it was not market manipulation.

However, the price of $CYBER had already fallen like investors leaving and was unlikely to return.

Governance Risk: Chips Too Concentrated

In addition, the low circulating supply led to concentrated chips, and the issue of excessive centralization still reflected in the voting on the proposal.

From the voting results, a user with an address starting with 0xEdb voted in favor with 54,000 CYBER, accounting for 87% of the total votes of 62,000.

Two Major Market Makers in Action

DWF Labs

On August 22, DWF Labs increased its holdings of about 170,000 $CYBER at an average price of $4.5 on Binance, totaling approximately $765,000.

Subsequently, on September 1, DWF Labs transferred the tokens from Binance to Bithumb through the address starting with 0xc8d, and sold them in 7 transactions at an average price of $8.6 (about $1.462 million).

If all these orders were completed at the time, they would have made a profit of $697,000, with a profit margin of over 91%.

Wintermute

According to The Data Nerd monitoring, Wintermute received 518,000 $CYBER from the CyberConnect team's wallet and OTC off-exchange on August 15, 20, and 21, accounting for 4.6% of the initial supply, all of which were deposited into Binance to increase liquidity.

On August 20, Binance happened to open CYBER/USDT contract trading.

It is reported that Wintermute's average holding price was around $4 to $4.5, and it seemed to have sold in batches by August 31, estimating a profit of about $1.424 million.

Reducing Losses through Contract Data Analysis

According to data analyst Riyuexiaochu, correctly identifying multiple signals can help investors reduce losses.

Warning One: Significant Increase in Contract Holdings

The author explains that in a bear market with poor liquidity, market makers need to inject a significant amount of funds to support trading, so they usually open contract positions before providing liquidity to increase overall profits.

Therefore, a significant increase in contract holdings at position 2 is one of the signals for market makers to enter the market.

After the initial price surge and natural retracement at position 3, if the subsequent contract holdings remain stable without a significant decrease, it indicates that market maker funds are still in the market.

Warning Two: Price Range-bound, Slow Decline in Holdings

Large holders switching from short to long at position 5, aligned with the direction of the long and short positions, with holdings continuing to increase, can be seen as market consensus driving higher prices.

However, as the price enters consolidation at position 6, with a slight decrease in holdings, it can be seen as a position for profit-taking.

Warning Three: Momentum Shifts

In the final price surge, active buying and selling volume shifted from bullish to bearish at positions 7 to 9, indicating a significant withdrawal of market maker funds and the final exit position.