The depreciation of the MANTRA (OM) token has caused distress among investors, resulting in substantial financial losses for many. As analysts investigate the reasons behind the token's downfall, uncertainties linger.

BeInCrypto sought advice from industry specialists to pinpoint five critical warning signs that led to MANTRA's collapse and suggest strategies for investors to avoid similar risks in the future.

MANTRA (OM) Crash: Factors Overlooked by Investors and Risk Prevention Measures

In April, BeInCrypto first reported about OM's staggering 90% decline. This crash raised suspicions, with investors accusing the team of executing a pump-and-dump scheme. Experts recognized a number of early indicators that signified potential issues.

However, many overlooked the associated risks with the project.

1. MANTRA Red Flag: OM Tokenomics

In 2024, OM's tokenomics were altered following a community vote in October. The token transitioned from an ERC20 token to the native L1 staking coin for the MANTRA Chain.

In addition, an inflationary tokenomic model with an unlimited supply was adopted, replacing the prior hard cap. This change also led to an increase in the total token supply to 1.7 billion tokens.

However, this transition had its drawbacks. According to Jean Rausis, co-founder of SMARDEX, the alteration in tokenomics was a concern in the OM downfall.

"In 2024, the project expanded its token supply to 1.77 billion and shifted to an inflationary model, which diluted its original holders. Complicated vesting favored insiders, while a low circulating supply and significant FDV fueled hype and price manipulation," Jean Rausis stated to BeInCrypto.

Moreover, concerns were raised regarding the team's control over the OM supply, which reflected centralized authority and potential for price manipulation.

Phil Fogel, co-founder of Cork, highlighted that approximately 90% of OM tokens were held by the team, indicating a high level of centralization that could have facilitated manipulation. The team's governance control also undermined the project's decentralized nature.

Strategies for Protection

Phil Fogel noted that a concentrated token supply isn't always a warning sign, but it is essential for investors to be aware of who holds substantial amounts, their lock-up conditions, and if their participation aligns with the project's decentralized objectives.

Ming Wu, founder of RabbitX, emphasized the importance of analyzing such data to uncover potential risks that might jeopardize the project in the long term.

Tools like bubble maps can help identify risks associated with token distribution, according to Wu.

2. OM Price Action

2025 witnessed significant market volatility, with many coins experiencing sharp declines due to broader macroeconomic pressures. Despite this, OM's price remained relatively stable until its recent crash.

"The most glaring red flag was the price action. While the overall market was declining, OM's token price exhibited unnatural patterns of pumping, plateauing, and then repeating the cycle," Jean Rausis shared.

Rausis suggested that this irregular price action signaled potential issues or deficiencies within the project. However, he pointed out that recognizing such distinctive price movements would require some technical analysis knowledge, making it easy for less experienced investors to miss them.

Even so, Rausis mentioned that signs indicating problems with the project were notable to the untrained eye, ultimately leading to the crash.

Protection Strategies

Investors' optimism about OM's resilience during the market downturn proved costly. Risk Control Adviser Eric He from LBank emphasized the importance of proactive risk management to avert collapses akin to OM's.

"Diversification is crucial—spreading investments across multiple projects reduces exposure to a single token. Utilizing stop-loss triggers can automate damage control in volatile conditions," Eric advised.

Ming Wu echoed a similar sentiment, stressing the importance of avoiding over-allocation to a single token. Diversifying investments helps mitigate risk and enhances the stability of the overall portfolio.

Investors can use perpetual futures as a risk management tool to hedge against potential price declines in their holdings, according to Wu.

Phil Fogel recommended focusing on a token's liquidity, considering factors such as float size, price sensitivity to sell orders, and entities that can significantly influence the market.

3. Project Fundamentals

Experts highlighted significant disparities in MANTRA's TVL. Eric He pointed out a considerable gap between OM's fully diluted valuation (FDV) and the TVL. OM's FDV stood at $9.5 billion, while its TVL was only $13 million, suggesting a potential overvaluation.

"A $9.5 billion valuation against $13 million TVL indicates instability," Forest Bai, co-founder of Foresight Ventures, remarked.

Critiques were also directed towards the airdrop. Jean Rausis described the airdrop as chaotic due to delays, frequent changes in eligibility rules, disqualification of participants, and suspected bot activity remaining unchecked.

"The airdrop favored insiders disproportionately while excluding genuine supporters, highlighting a lack of fairness," Phil Fogel reiterated.

Further criticism was raised concerning the team's alleged associations with questionable entities and ties to questionable initial coin offerings (ICOs), casting doubts on the project's credibility. Eric He suggested that MANTRA was supposedly linked to gambling platforms in the past.

Protection Strategies

Forest Bai emphasized the importance of verifying the project team's credentials, reviewing the project roadmap, and monitoring on-chain activity for transparency. Investors were advised to assess community involvement and compliance with regulations to evaluate the project's long-term sustainability.

Ming Wu stressed the significance of distinguishing between genuine growth and artificially inflated metrics.

"Recognizing authentic growth from activities artificially inflated through incentives or airdrops is critical. Unsustainable tactics can generate short-term metrics but fail to reflect actual engagement," Wu informed BeInCrypto.

Wu suggested researching the background of the project team members to identify any history of fraudulent activities or involvement in questionable ventures, ensuring investors make informed decisions before committing to a project.

4. Whale Movements

Before the crash, a whale wallet reportedly associated with the MANTRA team deposited 3.9 million OM tokens into the OKX exchange, as reported by BeInCrypto. Experts pointed out that this was not an isolated incident.

"Large OM transfers (43.6 million tokens, approximately $227 million) to exchanges shortly before the crash were a significant warning of potential sell-offs," Forest Bai conveyed.

Ming Wu highlighted the importance of vigilance regarding such substantial transfers, which often serve as warning signs. Moreover, analysts at CryptoQuant detailed what investors should be vigilant about.

"OM transfers to exchanges amounting to as much as $35 million within an hour raised a red flag. Transfers to exchanges below $8 million during a typical hour (excluding Binance transfers, which are typically large) indicate high exchange transfer volume," according to CryptoQuant.

Protection Strategies

CryptoQuant advised investors to monitor token flows into exchanges closely, as it could signal increased price volatility in the near future.

Risk Control Adviser Eric He outlined four strategies to keep abreast of large transfers.

Chain Sleuthing: Use tools like Arkham and Nansen to track significant transfers and monitor wallet activities.

Set Alerts: Platforms like Etherscan and Glassnode can notify investors of unusual market movements.

Track Exchange Flows: Monitor large flows to centralized exchanges.

Check Lockups: Employ Dune Analytics to ascertain if team tokens are being released sooner than anticipated.

He recommended focusing on market structure, citing that OM's crash revealed the importance of market depth. Kaiko data illustrated that 1% order book depth plummeted by 74% before the fall. Eric suggested checking liquidity metrics on platforms such as Kaiko; a 1% depth below $500,000 is a red flag.

Moreover, Phil Fogel stressed the necessity of monitoring platforms like X (formerly Twitter) for any chatter or speculation about potential dumps. Analyzing liquidity offers insight into whether a token can handle sell pressure without prompting a significant price decline.

5. Centralized Exchange Involvement

After the crash, MANTRA CEO JP Mullin swiftly attributed blame to centralized exchanges (CEXs). He asserted that the crash was precipitated by "reckless forced closures" during low-liquidity periods, insinuating negligence or deliberate positioning. Binance, however, cited cross-exchange liquidations as causal.

Notably, experts differed slightly on CEX's contribution to OM's downfall. Forest Bai claimed that CEX liquidations during low-liquidity hours exacerbated the crash by triggering cascading sell-offs, a sentiment shared by Eric He.

CEX liquidations were cited as a significant factor in the OM crash, acting as an accelerant. Thin liquidity and forced closures led to cascading liquidations, wiping out over $74.7 million within 24 hours, as highlighted by Eric.

However, Ming Wu regarded Mullin's explanation as a mere excuse. Analyzing the open interest in the OM derivatives market revealed that it represented less than 0.1% of OM's market capitalization. Wu found it intriguing that open interest in OM derivatives surged by 90% amid the market collapse, challenging the notion that liquidations or forced closures drove the price drop. Instead, it suggested that traders and investors bolstered short positions as the price decreased.

Protection Strategies

While the degree of CEX involvement remains debatable, the specialists highlighted the importance of investor safeguards.

"Limiting leverage can prevent forced liquidations, choosing platforms with clear risk policies is crucial, monitoring open interest aids in identifying liquidation risks, and storing tokens in self-custody wallets diminishes CEX exposure," Forest Bai recommended.

Eric He suggested mitigating risks by adjusting leverage dynamically based on volatility indicators. In instances where tools like ATR or Bollinger Bands signal high volatility, exposure should be reduced.

He also advised refraining from trading during low-liquidity periods, like midnight UTC, when the risk of slippage is heightened.

The MANTRA (OM) collapse serves as a stark reminder of the importance of thorough research and risk management in cryptocurrency investments. Employing these strategies suggested by experts can help investors navigate the crypto market with better judgment and security.