‘Hostile’ Market Conditions Force Bancor To Disable This Protection
The DeFi protocol Bancor on Monday said it has paused the Impermanent Loss Protection to protect liquidity providers (LPs) amid extreme market conditions. It will be reactivated once the crypto market stabilizes. Moreover, the Bancor DAO has been asked to pause the Impermanent Loss Protection for rewards on its liquidity pools.
In order to prevent further decline in BNT token prices, Bancor has used the BIP21 to disable swaps and liquidity provision for compromised tokens on the Bancor Network.
Bancor Pauses Impermanent Loss Protection Indefinitely
Bancor Network in a blog post on June 20 reported that its Impermanent Loss Protection feature will be temporarily paused to protect the DeFi protocol and liquidity providers. In fact, withdrawals will not be eligible for Impermanent Loss Protection and deposits are also not accepted.
However, trading will remain active and users will continue earning yields, but the withdrawal will only be possible when IL protection is reactivated.
“As our knowledge of current circumstances has increased, we have observed anomalies, if not manipulative behavior, occurring in the data.”
The recent sell-off of BNT rewards emissions led Bancor to pause IL protection. Generally, BNT rewards have a double cost. It decreases BNT token price, resulting in an impermanent loss. This impermanent loss is compensated to liquidity providers with additional BNT emissions.
The insolvency of two large centralized companies have caused the costs to rise further. The companies were liquidity providers which received BNT liquidity mining rewards. However, the companies continue to liquidate their BNT positions to cover their liabilities. Moreover, another unknown company has opened a large short position on the BNT token on an external exchange. It has caused the BNT price to fall further due to the selloff.
The Impermanent Loss Protection will be reactivated soon as the market stabilizes.
BNT Token Plummets 65% in a Week
BNT token is at risk as it has plummeted nearly 65% in just a week. Meanwhile, the Bancor (BNT) token price is down 95% since the all-time high, and Bancor ROI is down 88%.
At the time of writing, the BNT token price is trading at $0.51, up nearly 6%.
The liquidation risks of Three Arrows Capital and Celsius have caused a major crisis in the DeFi market. The companies are liquidating digital assets to repay their lenders.
- Polymarket Founder Shayne Coplan Teases Potential POLY Token After $2B ICE Deal
- FOMC Minutes Signal Fed Open to More Rate Cuts This Year, Bitcoin Bounces
- North Dakota To Issue ‘Roughrider’ Stablecoin Following Wyoming’s Footsteps
- Ethena Labs and Jupiter Partner to Launch JupUSD Stablecoin on Solana
- BlackRock’s Bitcoin ETF Leads ETFs With $3.5B Weekly Inflows as It Eyes $100B in AUM
- Bitcoin Price Prediction as US Govt. Shutdown Extends- What’s Next for BTC?
- Solana Price Megaphone Points to a Parabolic Move as SOL Treasuries Near $3B
- XRP Price Prediction Amid ETF Approval Roadblock as Analyst Warns of $2.72 Dip
- Binance Coin Price Prediction If It Surpasses Bitcoin Marketcap— Is $3000 Possible in 2025?
- ASTER vs HYPE Price Analysis – Which Perp DEX Token Looks Poised to Dominate Q4 Performance?
- Ethereum Price Could Soar to $6,500 as BlackRock’s ETF Nears $20B Milestone
Why Trust CoinGape
CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights Read more…to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
