Protocol River, a stablecoin, has blamed a concerted campaign of market manipulation in the recent extreme movements in the price of its tokens.
The platform claimed that massive short positions and huge conversions of River Pts caused an extreme and specific attack against its ecosystem. In a span of 24 hours, River Pts crashed by more than 75% whereas River fell by over 13%.
Suspect trading and put-on hold
River added that strangely trading behavior was initially noticed on November 7 on several exchanges. It was opened according to the protocol, and large short positions were taken as well as large sums of River Pts were converted into RIVER and sold immediately. To overcome the immediate market pressure the team launched buybacks of RIVER tokens to stabilize sentiment. The same pattern in trading however resurfaced on the following two days and River was compelled to halt all Pts conversions to avoid further losses.
The staff described the situation as a Soro-type of attack, which is a focused market pressure approach. River in its post event statement said that by leaving the conversion system open it would have enabled the attackers to further escalate the liquidity drain in a feedback loop. The suspension it said was a necessary evil to avoid complete market collapse.
Signs of early recovery and intervention
After the suspension, River noted that the suspected attackers started to close their short positions indicating that the intervention worked. Limited buybacks were once again resumed by the company a little later and it affirmed that it is redesigning its conversion mechanism to enhance security and stability. River termed the scenario as a tough but a required move to serve the greater good and make the protocol sustainable.
The group focused on the fact the action was made to protect the users, not to limit trading. It also promised to be transparent during the recovery, both on-chain and exchange data will be shared to explain the details of the incident. River will also have a community AMA to highlight concerns of the holders and provide next steps.
Having faults of design and regaining confidence
River acknowledged that the volatility revealed inefficiencies in its conversion design which it is in the process of improving. The protocol indicated that there are improvements in risk management that is underway and there are new controls that will stop future coordinated exploitation.
River explained that it is not in the business of speculative partnerships or short-term trading to fix speculation. The company reinstated its sincerity towards sustainable development and open communication. River has been commended by many members of the community because of its fast reaction and its ability to communicate openly. Other people compelled the team to give definite schedules of the conversion reinstatement and share milestones to minimize uncertainty.
The reaction of the river protocol to the recent volatility demonstrates the danger of the manipulation of the market and the necessity of a swift response. River will be equipped with new mechanisms and better risk controls in an attempt to rebuild confidence and stability within its ecosystem.
