Kaspa's 85% Drop: Did MEXC Accidentally Reveal Market Control?

The Kaspa price got hit hard during the current market downfall and plunged to $0.065 range which is just slightly above the local bottom

The Kaspa price got hit hard during the current market downfall and plunged to $0.065 range which is just slightly above local bottom at around $0.057 set earlier this month.

Meanwhile, ‘Kaspa Report’ X account continues to post amazing threads about what’s going on around KAS on exchanges, in this case, particularly MEXC.

MEXC’s Unexpected Revelation

Recently, there was a report from a community member about a dramatic drop in Kaspa’s daily active supply. Upon checking, Kaspalytics data confirmed this.

This led ‘Kaspa Report’ to investigate further and discovered that the daily active supply fell dramatically at the exact time MEXC began its wallet maintenance.

When the exchange paused its wallet operations, the daily active supply went down from 5.04% to just 0.76% — an enormous 85% decrease.

This unplanned maintenance also had the effect of highlighting the outsized influence that a single exchange exerts on the Kaspa ecosystem.

While it was previously difficult to determine exactly how much control MEXC had over Kaspa’s daily movement, the exchange’s own wallet maintenance had the knock-on effect of providing clear data on their market dominance.

The daily active supply then rebounded around the time that MEXC resumed most of its wallet activities on March 27, further confirming the connection between MEXC operations and Kaspa’s on-chain metrics.

It’s worth noting that even during the maintenance period, MEXC continued processing on-chain KRC-20 token transfers, though these involved minimal amounts of KAS and had negligible impact on the overall metrics. These transfers can be viewed on the blockchain through a specific wallet address that was shared by Kaspa Report.

Daily Active Supply Explained

The thread went on to explain how daily active supply is calculated.

Essentially, Kaspalytics estimates the timestamp of each UTXO (Unspent Transaction Output) in Kaspa’s UTXO set using the DAA score. If a UTXO’s estimated age is less than 24 hours, it’s counted as part of the daily active supply.

Since daily active supply does affect Kaspa’s spot price, the fact that MEXC's sudden inactivity did decrease the daily active is partially revealing of its control over Kaspa's pricing dynamics. This data suggests that much of Kaspa's price suppression may originate from MEXC's activities.

Market Implications

While a single exchange controlling 85% of Kaspa’s daily on-chain activity is certainly noteworthy, it’s important to point out that this metric isn't the sole determinant of the Kaspa price.

Exchange pricing primarily comes from order book matching, where the highest bid meets the lowest ask price. However, the daily active supply data does offer valuable insight into MEXC's potential control over price arbitrage across exchanges.

The Kaspa community is responding by rapidly developing infrastructure for decentralized exchanges. Their goal is for DEX volume to eventually surpass centralized exchange volume once the smart contract infrastructure is complete. Fortunately, MEXC's actions only have a temporary impact on Kaspa's price.

Paradoxically, this might actually benefit Kaspa's long-term decentralization. By keeping KAS prices lower, more diverse income groups can afford to accumulate and hold the token, potentially leading to wider distribution of ownership.

This could help those with lower incomes to invest in and hold Kaspa which could lead to a more economically diverse distribution of KAS ownership.

But despite this silver lining, Kaspa Report characterizes MEXC's market manipulation as “deplorable.”

Beyond market manipulation, there are also reports of MEXC harassing Kaspa community members, with one account (@MEXC_KAS_Fraud) recently reporting suspicious login attempts.

Minimizing dependency on any single exchange will likely remain a priority for supporters of the project.