Bancor Pauses Protection Mechanism Due to ‘Hostile Market Conditions’

cryptonews.com:

The decentralized finance (DeFi) protocol Bancor (BNT) said it has paused its impermanent loss (IL) protection mechanism due to what it calls “hostile market conditions.”

In an announcement published on Monday, the team behind Bancor said that impermanent loss protection has been “temporarily paused,” while promising that it will be turned back on “as the market stabilizes.”

“There is no ongoing attack and funds on the protocol are secure,” the announcement further said, adding that remaining users will continue to earn yield and “be entitled to withdraw their fully-protected value when IL protection is reactivated.”

Elaborating on the reason for halting the impermanent loss protection, the announcement said that “anomalies, if not manipulative behavior” have been observed in the data.

The announcement went on to blame some of their problems on “the recent insolvency of two large centralized entities,” who it said were long-time liquidity providers in Bancor V2.1.

“To cover their liabilities, these entities have rapidly liquidated their BNT positions and withdrawn large sums of liquidity from the system, while an unknown entity has opened a large short position on the BNT token on an external exchange,” the announcement said.

The announcement did not name any of the entities it referred to.

It added that on-chain data now suggests “some of the worst BNT rewards dumping is behind us.”

The team also said that they expect the pause to give the protocol “some room to breathe and recover.” It added that while trading remains active on the protocol, deposits have been halted.

In the crypto community, some people have expressed skepticism about the way Bancor’s IL protection supposedly works:

Bancor is a DeFi protocol that allows users