Marinade Finance’s mSOL Token Dumped and Pumped 18% in 30 Minutes and Here is Why

• A Solana whale sold over $5 million worth of mSOL tokens, causing the price to suddenly crash 18% in under 30 minutes before rebounding swiftly
• Marinade Finance’s incentive program rewarding Solana stakers with liquid mSOL tokens succeeded in attracting stakers but also whales whose later selling pressured prices
• The mSOL flash crash highlights the volatility risks of protocols incentivizing staking with liquid tokens, as the actions of one whale can temporarily upend prices

On Tuesday, the price of mSOL, a liquid staking derivative for Solana, suddenly crashed after a large holder sold off over $5 million worth of the token. The steep decline and quick rebound highlights the risks that whale activity can pose to crypto prices.

The Sudden Sell-Off

In the span of under 30 minutes, the price of mSOL plummeted from around $77 to below $67 after 1:35pm ET. This represented an 18% drop overall. The flash crash appears to have been triggered by a single Solana whale that swapped out more than $5 million worth of mSOL.

After the large holder sold their tokens, mSOL prices rebounded swiftly. By 1:57pm ET, mSOL had risen back above $77, erasing the losses.

The Volatility of Liquid Staking Rewards

Earlier this year, Marinade Finance launched an incentive program to reward users for staking Solana and receiving mSOL. The goal was to increase the amount of Solana locked on Marinade’s platform. However, the sell-off shows the potential downsides of protocols rewarding staking with liquid tokens. If incentive programs are successful, they can attract whales whose later selling applies downward pressure on prices.

Conclusion

While liquid staking derivatives like mSOL offer flexibility and liquidity for stakers, this episode is a reminder that incentives to earn such tokens can increase volatility. As the mSOL crash displayed, the actions of a single whale are sometimes all it takes to upend prices, at least temporarily.