Polyhedra’s ZKJ Crash: Liquidity Attack and Sell-Off Drivers

In mid-June 2025, Polyhedra’s ZKJ token plunged over 80% on PancakeSwap and major exchanges after coordinated liquidity withdrawals and massive dumps erased roughly $500 million in value. This report breaks down the sequence of events and the key drivers behind the collapse.

ZKJ Crash Catalysts 

Polyhedra’s team flagged a coordinated liquidity attack on the ZKJ/KOGE pool on PancakeSwap as the initial spark. Several wallets removed large LP positions, swapped KOGE for ZKJ, then dumped ZKJ aggressively into fragile pools. That sudden outflow drained depth and shifted pressure into the main USDT pair. The pool’s imbalanced liquidity meant even modest withdrawals cascaded into steep price falls.

Next, Wintermute’s activity intensified the slide. Polyhedra noted that over 3.39 million ZKJ tokens flowed into centralized exchanges within the crash window, amplifying sell pressure. Large deposits overwhelmed order books. As prices tumbled, margin positions liquidated across platforms, feeding further drops in a vicious cycle. The token fell over 80% from near $2 to about $0.32 in hours, wiping nearly half a billion in market cap.

Other factors weighed in. The ZKJ token had hovered around $2 since late 2024, giving a false sense of stability. An upcoming unlock of 15.5 million tokens loomed, stoking concern over fresh supply hitting markets soon. Thin liquidity across trading pairs made ZKJ vulnerable: low-depth pools can’t absorb heavy sells. Social media buzz and fear accelerated panic selling. Together, these elements triggered the steep plunge.

Polyhedra’s Response and Path Forward

In a preliminary report, Polyhedra’s team stressed that abnormal on-chain transactions and concentrated liquidity pools set the stage. The team promised a full post-mortem and measures to shore up liquidity. They also announced buyback plans to stabilize price and restore confidence. Yet restoring depth requires systemic fixes: diverse pools, incentives for liquidity providers, and closer monitoring of large wallet flows.

Polyhedra’s Roots and Why Wintermute Faces Heat

Polyhedra Network, co-founded by Tiancheng Xie and James Zhang, builds ZK bridges to boost cross-chain data privacy and scalability. Its ZKJ token launched in late 2024 to power governance, staking, and liquidity incentives in the ecosystem. Early buzz came from partnerships and testnet traction. Yet rapid growth bred thin liquidity pools, leaving ZKJ exposed when trading spiked.

Wintermute’s name surfaced as a key player in the sell-off storm. Reports claim a Wintermute-linked wallet funneled over 3 million ZKJ into major exchanges during the crash, stoking panic. Critics recall past market maker dumps – Wintermute offloaded tokens in other projects, sparking sell pressure. While Wintermute denies wrongdoing, its heavy CEX deposits during ZKJ’s collapse drew ire. For many observers, the large-scale selling from a designated market maker felt less like standard operations and more like a betrayal of trust..

Token projects must guard against outsized players triggering chaos. Polyhedra’s reliance on a few liquidity sources magnified Wintermute-linked actions. Builders need diverse pools and layered incentives to cushion shocks. For traders, the episode is a wake-up call: monitor large wallet flows and pool depth, not just fundamentals. As for market makers, transparent engagement and clear limits on large trades can ease trust.

Ultimately, the ZKJ crash teaches that cutting-edge tech demands equally robust market design to thrive.

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