GARI, a crypto token introduced by the creators of the Chingari app, has faced a massive drop in its value last week. The token tanked by 90 percent within a span of a few hours. Investors are now pointing fingers, upset that they have lost money.
GARI was launched in late 2021 by the creators of Chingari, a short video app that became popular after the TikTok ban. The app currently has over 30 million monthly active users.
The token was intended to help creators on the platform earn crypto rewards for uploading content on the app. With the celebrity endorsement of Bollywood Star Salman Khan, the token managed to retain its value even after the crypto market crash in June.
The bear market now seems to have caught up with GARI.
What Caused the Crash?
On 4 July, the token's price dropped from $0.73 at 9:30pm to $0.13 at 11:00 pm. The price had tanked by 90 percent between 9:45 and 10:00pm alone. This crash has been compared to the infamous Terra Luna event.
The cause of the crash has been traced to a dump-off of 2 million GARI tokens on the exchange platform KuCoin. On July 4th, a whale, ie, a huge investor, sold off their tokens at a cheap price, leading to a cascade of selloffs and panic among investors.
Many investors and market watchers have claimed that KuCoin itself is the whale that dumped its stock of GARI, while others point the blame at the GARI Network itself. Both parties have denied the allegations so far.
Johnny Lyu, CEO of KuCoin, addressed the situation, saying that KuCoin is the biggest and most liquid market for GARI, and that many sellers chose to sell there. He also added that buyers had taken advantage of the situation by buying cheap on KuCoin and selling them at a profit elsewhere.
GARI Network has conducted an internal investigation following this event and found no evidence of a hack or foul play of any kind. They have assured investors on Twitter as well as Chingari that their Tokens are safe in their reserves. The company has promised to look into the matter with Indian crypto exchanges.
'Black Swan Event'
GARI Network CEO Sumit Ghosh called this a "black swan event", denying that his company was behind the dumping of the tokens, according to an Economic Times report.
He further explained that the network's market maker, an institution that provides liquidity for transactions, was unable to handle the sell off of 2 million tokens.
Their market maker had a limit of 600,000. The sudden, massive sell off proved to be too much and inevitably led to the value of GARI plummeting.
Those who allege that KuCoin was the culprit behind the selloff argue that the company was becoming insolvent. CEO Johnny Lyu has denied these claims saying that they have just completed a round of fundraising worth $150 million and are one of the few crypto companies hiring after the June 2022 market crash.
(With inputs from The Economic Times)
(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)