Polyhedra’s ZKJ token plunges 83% after liquidity crisis

Polyhedra Network’s native token, ZKJ, dropped over 83% on June 15, hitting an all-time low of $0.3073, after a series of abnormal transactions and mass liquidity withdrawals linked to its associated token, KOGE.

According to a June 15 post on x by Polyhedra, the incident stemmed from “abnormal on-chain transactions” involving the ZKJ/KOGE trading pair. KOGE, issued by a group known as 48 Club DAO, operates in close connection with ZKJ through shared liquidity pools and has been incentivized through Binance’s Alpha Points program.

Because the tokens are regularly traded against each other, their price dynamics are closely related. A chain reaction began when traders converted KOGE into ZKJ in large quantities as the liquidity in the KOGE/USDT pool dried up. This flooded the ZKJ/USDT pool.

Major holders pulled a sizable portion of KOGE and ZKJ from on-chain pools, according to Binance, starting a “liquidation cascade” that caused the prices of both assets to plummet. KOGE dropped from $62 to $24 while ZKJ fell from nearly $2 to $0.30.

On-chain analysts linked the price collapse to wallets farming Alpha Points. One wallet withdrew over 60,000 KOGE, roughly $3.7M, and 273,000 ZKJ, about $530K, while two others liquidated another $5 million combined. The rush was further heightened with a scheduled unlock of 15.5 million ZKJ tokens on June 19, which will add about $10 million in potential sell pressure to already stressed markets.

Community reports indicate that the KOGE/USDT pool was drained first, leaving holders unable to exit their positions. With KOGE/USDT liquidity gone, investors rushed to swap into ZKJ using the still-functional KOGE/ZKJ pool. The resulting spike in ZKJ redemptions overwhelmed its Tether (USDT) pair, leading to a chain reaction that pushed ZKJ to record lows.

Despite the collapse, Polyhedra insisted the project’s fundamentals remain strong and that it is conducting a full review of the incident. Binance responded by adjusting Alpha Points rules. Starting June 17, trades between Alpha tokens like KOGE and ZKJ will no longer count toward user point totals, a move intended to limit similar imbalances.

The 48 Club has not publicly commented since the crash, though it had previously disclosed that KOGE was fully diluted at launch and stated no commitment to restrict token sales. DAO members expressed concerns, accusing the team of poor planning and lack of transparency.

A bullish scenario following the collapse will depend on Polyhedra’s ability to quickly restore market stability and provide insight into its liquidity structure and token utility. Rebuilding trust and slowing the selloff may be possible with a detailed post-mortem and structural changes like better isolation between the KOGE and ZKJ markets.

But if investor confidence continues to drop, a bearish outcome might occur, especially since another big ZKJ token unlock is scheduled for later this week. If there is no clear solution, selling pressure may persist and prices may level off, which would eventually damage ZKJ’s reputation.