Waves, Neutrino, and FTX: Is the project nearing its end?
In March Waves was the top performer, and now the price is plummeting.
In March Waves was the standout, and now the price is dropping. Its stablecoin is nearly blown up. The founder is accused of market manipulation. What’s behind the allegations?
After a surge in March, Waves this week fell by almost 50 percent. The crash follows a major drama with huge accusations against the team and their project since early April. Waves is allegedly involved in extreme market manipulation and even being the "biggest Ponzi scheme in crypto".
The Waves stablecoin Neutrino briefly lost its peg to the US dollar and dropped in two days to as low as 68 cents. Waves itself is being aggressively shorted by, among others, the crypto exchange FTX. The network’s founder Sasha Ivanov insults his critics and threatens legal action. To stop the token’s short-selling, he is pushing controversial measures. Is the project teetering on the edge of collapse?
What is Waves?
Waves was founded in 2016. It is an open-source Layer1 network that lets users create their own cryptocurrencies with the push of a button. It now includes a full ecosystem, including play-to-earn video games, a crypto exchange, DeFi platforms, an NFT marketplace, and more. The platform’s most popular feature, similar to Terra (LUNA), is its own algorithm-based stablecoin. This is Neutrino USD (USDN), backed by the Waves token.
The project rode the strong altcoin rally of 2021, with its market capitalization rising from $700 million in January of last year to more than $3 billion today. In March this year, Waves hit a record high of almost $6 billion. Many credited the rally to a forthcoming network upgrade.
Is Waves the "Ethereum of Russia"?
The first accusations against the team surfaced in March. Soon after Russia’s invasion of Ukraine, allegations emerged that Waves was the "Ethereum of Russia". It was said to be used by Russians to circumvent sanctions, Google searches for the token exploded, as did its value.
In the past, the platform worked closely with Russian companies, such as state defense contractor Rostec and private bank Alfa. Waves also had an office in Moscow. The team says it has severed all ties with Russia and relocated. Sasha Ivanov emphasizes that he lived in Russia but is Ukrainian.
Did Waves crash its own token?
On March 31, 0xHamz, an anonymous crypto investor with nearly 16,000 followers on Twitter, posted new and serious allegations against the team. In a long Twitter thread enriched with data and blockchain metrics, he claimed Waves is the "biggest Ponzi in crypto."
“WAVES is the biggest ponzi in crypto It has recklessly engineered price spikes by borrowing USDC at 35% to buy its own token Continuous WAVES market cap growth is needed to keep the system stable WAVES will eventually crash and USDN will break with it You're on notice🧵”
0xHamZ (@0xHamz) March 31, 2022
The team would be printing money in the form of its neutrino stablecoin, artificially driving Waves’ price. The consequence: the token would crash, and Neutrino would lose its dollar peg. More than a billion US dollars are in circulation as Neutrino stablecoin. It’s one of the network’s main use cases, and breaking the dollar peg represents an existential threat. "Prepare for an apocalypse" was the warning. Not long after, the price rebounded to 96 cents.
Sasha Ivanov insults his critics
Waves founder Sasha Ivanov sees the accusations against him and his team as an organized campaign launched by the hedge fund Alameda. On April 3, he tweeted: "Get your popcorn: Alameda is trying to manipulate the price of Waves." The fund allegedly opened a large short position against Waves. Short selling involves borrowing tokens or shares and betting on a price drop. Alameda is a subsidiary of the crypto exchange FTX.
FTX CEO Sam Bankman-Fried responded on Twitter that Waves’ accusations against him were an "obvious bullshit conspiracy theory." The hedge fund did not comment to CoinDesk or Alameda about whether it had opened a short position against Waves.
On April 5, Waves hosted a Twitter Space to discuss the allegations, CoinDesk reported. Crypto investor 0xHamz was also invited. But the Waves founder is said to have insulted and threatened him with the words:
"You’re a troll ... maybe your voice is generated by AI, I don’t know. I’d like to talk to you one-on-one. I can show you everything, my friend. You’re not doing your homework. These are unfounded accusations. And if you’re a real person there could be legal consequences. So I’d advise you: think carefully about what you’re doing."
Sasha Ivanov quoted by CoinDesk
At the same time, Waves proposed changes to its network. It would make it almost impossible to short the token. A lot of the cryptocurrency is held in custody via its own DeFi platform, Vires Finance. The team wants to prevent people from borrowing large amounts of Waves from the platform. So far, the vote hasn’t progressed.
