Plasma’s XPL Token Turmoil: Insider Selling Denials, Whale Manipulation, and a $2.8B Debut Gone Volatile

Founder’s Denial Sparks Fierce Debate as Token Loses Nearly Half Its Value

TL;DR

• Plasma founder Paul Faecks denied allegations of insider or team selling after XPL’s value plunged nearly 50%.
• On-chain data showed more than 600 million XPL moved from vaults to exchanges, raising community concerns.
• The token launched with a $2.8 billion coin market cap but was quickly rocked by crashes, whale exploits, and extreme volatility.

Plasma’s newly launched XPL token has been at the center of one of the most heated debates in the crypto market this year, after a swift rise and equally dramatic fall prompted questions about insider activity. Founder Paul Faecks firmly rejected allegations that the team had dumped tokens onto the market, stating that “no team members have sold any XPL” and emphasizing that all team and investor allocations are locked for three years with a one-year cliff. 

His denial followed mounting speculation fueled by community claims that insiders had contributed to the crash, which saw XPL lose nearly half its value within days of its peak. Skeptics seized on what they saw as careful wording, noting that the denial did not explicitly address the 8% of total supply—equivalent to 800 million XPL—that was unlocked at launch from the ecosystem and growth allocation. On-chain analysts reported that more than 600 million tokens had been moved from the Plasma team vault prior to launch, with roughly 250 million sent to Binance, 120 million to Bitfinex, and another 260 million distributed across other exchanges. 

The revelations heightened distrust, with some critics arguing that the scale of unlocked tokens explained the heavy supply pressure. Faecks dismissed the idea of collusion with outside market makers such as Wintermute and pushed back against attempts to link Plasma’s staff to controversial past projects, stressing that only three of fifty employees had ties to platforms like Blast or Blur while the majority had backgrounds at Google, Facebook, and Goldman Sachs.

The fallout came as the token’s crypto price crashed from highs of roughly $1.70 to around $0.83, a near-50% plunge from its short-lived rally. Traders highlighted indiscriminate spot selling as the main catalyst, rather than systemic flaws, and suggested that strong upside could resume once the sell-off abated. Still, leveraged traders faced nearly $10 million in forced liquidations over just four hours as open interest collapsed from $1.86 billion to $1.20 billion.

Price action was further distorted by unusual events in derivatives markets. During the transition from pre-launch to live trading, XPL perpetuals briefly spiked above $4 due to a glitch, triggering widespread liquidations until exchange operator Aster reimbursed traders in USDT. Separately, a whale executed a $33 million USDC long-short strategy on Hyperliquid, driving the XPL crypto price index up 200% and causing $46 million in liquidations, while pocketing roughly $47.5 million in minutes. The exploit exposed vulnerabilities in DeFi market structures, particularly when liquidity is shallow and price anchoring weak.

Despite the volatility, XPL rebounded by about 15% following Faecks’ comments, with some reports noting a 113% recovery back to $1.54. Analysts pointed to liquidity incentives on Uniswap and continuing mainnet momentum, with projections from firms like InvestX suggesting the coin market cap could eventually surpass $6 billion, pushing prices toward $3.50 if adoption holds. Whales appeared to take advantage of depressed prices, with one investor reportedly accumulating 30 million tokens valued at around $31 million.

The storm came only days after a highly publicized launch on September 25, when Plasma introduced its mainnet beta and debuted XPL with a starting coin market cap of $2.8 billion. The token traded as high as $1.54 on its first day, with early investors seeing returns as high as 19 times their presale entries. The project’s design allocated 40% of supply to ecosystem growth, 25% each to team and backers, and the remainder to validator rewards, with staking, gas fees, and rewards forming the token’s main functions. Plasma also rolled out a neobank service called Plasma One to integrate stablecoin-based payments and savings into its ecosystem.

Total value locked surged into the billions almost immediately, with some trackers later estimating more than $14 billion amid memecoin trading booms on the chain. Heavy backing from firms like Bitfinex, Tether, Bybit, and Founders Fund drove speculative interest, though the combination of a stablecoin infrastructure vision and memecoin speculation raised questions about long-term credibility. The turbulence around XPL highlights how fragile sentiment can be in the digital asset world, where optics around token flows and allocation structures carry as much weight as fundamentals. Plasma now faces the challenge of turning early hype into durable confidence as it navigates the fallout from one of the sharpest reversals in recent memory.

This article has been refined and enhanced by ChatGPT.