5 Crucial Red Flags Investors Missed

The collapse of the MANTRA (OM) token has left investors reeling, with many facing significant losses. As analysts comb through the causes of the collapse, many questions remain.

BeInCrypto consulted industry experts to identify five critical red flags behind MANTRA’s downfall and reveal strategies investors can adopt to steer clear of similar pitfalls in the future.

MANTRA (OM) Crash: What Investors Missed and How to Avoid Future Losses 

On April 13, BeInCrypto broke the news of OM’s 90% crash. The collapse raised several concerns, with investors accusing the team of orchestrating a pump-and-dump scheme. Experts believe that there were many early signs of trouble.

Yet, many overlooked the risks associated with the project.

1. MANTRA Red Flag: OM Tokenomics

In 2024, the team changed OM’s tokenomics after a community vote in October. The token migrated from an ERC20 token to the native L1 staking coin for the MANTRA Chain. 

In addition, the project adopted an inflationary tokenomic model with an uncapped supply, replacing the previous hard cap. As part of this transition, the total token supply was also increased to 1.7 billion.

However, the move wasn’t without drawbacks. According to Jean Rausis, co-founder of SMARDEX, tokenomics was a point of concern in the OM collapse.

“The project doubled its token supply to 1.77 billion in 2024 and shifted to an inflationary model, which diluted its original holders. Complex vesting favored insiders, while low circulating supply and massive FDV fueled hype and price manipulation,” Jean Rausis told BeInCrypto.

Moreover, the team’s control over the OM supply also raised centralization concerns. Experts believe this was also a factor that could have led to the alleged price manipulation.

“About 90% of OM tokens were held by the team, indicating a high level of centralization that could potentially lead to manipulation. The team also maintained control over governance, which undermined the project’s decentralized nature,” said Phil Fogel, co-founder of Cork.

Strategies to Protect Yourself

Phil Fogel acknowledged that a concentrated token supply isn’t always a red flag. However, it’s crucial for investors to know who holds large amounts, their lock-up terms, and whether their involvement aligns with the project’s decentralization goals.

Moreover, Ming Wu, the founder of RabbitX, also argued that analyzing this data is essential to uncover any potential risks that could undermine the project in the long term.

“Tools like bubble maps can help identify potential risks related to token distribution,” Wu advised.

2. OM Price Action 

2025 has been marked as the year of significant market volatility. The broader macroeconomic pressures have weighed heavily on the market, with the majority of the coins experiencing steep losses. Yet, OM’s price action was relatively stable until the latest crash.

“The biggest red flag was simply the price action. The whole market was going down, and nobody cared about MANTRA, and yet its token price somehow kept pumping in unnatural patterns – pump, flat, pump, flat again,” Jean Rausis disclosed.

He added that this was a clear sign of a potential issue or problem with the project. Nevertheless, he noted that identifying the differentiating price action would require some technical analysis know-how. Thus, investors lacking the knowledge would have easily missed it.

Despite this, Rausis highlighted that even the untrained eye could find other signs that something was off, ultimately leading to the crash.

Strategies to Protect Yourself

While investors remained optimistic about OM’s resilience amid a market downturn, this ended up costing them millions. Eric He, LBank’s Community Angel Officer, and Risk Control Adviser emphasized the importance of proactive risk management to avoid OM-style collapses. 

“First, diversification is key—spreading capital across projects limits single-token exposure. Stop-loss triggers (e.g., 10-20% below buy price) can automate damage control in volatile conditions,” Eric shared with BeInCrypto.

Ming Wu had a similar perspective, emphasizing the importance of avoiding over-allocation to a single token. The executive explained that a diversified investment strategy helps mitigate risk and enhances overall portfolio stability. 

“Investors can use perpetual futures as a risk management tool to hedge against potential price declines in their holdings,” Wu remarked.

Meanwhile, Phil Fogel advised focusing on a token’s liquidity. Key factors include the float size, price sensitivity to sell orders, and who can significantly impact the market.

3. Project Fundamentals

Experts also highlighted major discrepancies in MANTRA’s TVL. Eric He pointed out a significant gap between the token’s fully diluted valuation (FDV) and the TVL. OM’s FDV reached $9.5 billion, while its TVL was only $13 million, indicating a potential overvaluation.

“A $9.5 billion valuation against $13 million TVL, screamed instability,” Forest Bai, co-founder of Foresight Ventures, stated.

Notably, several issues were also raised regarding the airdrop. Jean Rausis called the airdrop a “mess.” He cited many issues, including delays, frequent changes to eligibility rules, and the disqualification of half the participants. Meanwhile, suspected bots were not removed.

“The airdrop disproportionately favored insiders while excluding genuine supporters, reflecting a lack of fairness,” Phil Fogel reiterated. 

The criticism expanded further as Fogel pointed out the team’s alleged associations with questionable entities and ties to questionable initial coin offerings (ICOs), raising doubts about the project’s credibility. Eric He also suggested that MANTRA was allegedly tied to gambling platforms in the past.

Strategies to Protect Yourself

Forest Bai underscored the importance of verifying the project team’s credentials, reviewing the project roadmap, and monitoring on-chain activity to ensure transparency. He also advised investors to assess community engagement and regulatory compliance to gauge the project’s long-term viability.

Ming Wu also stressed distinguishing between real growth and artificially inflated metrics.

“It’s important to differentiate real growth from activity that’s artificially inflated through incentives or airdrops, unsustainable tactics like ‘selling a dollar for 90 cents’ may generate short-term metrics but don’t reflect actual engagement,” Wu informed BeInCrypto.

Finally, Wu recommended researching the background of the project’s team members to uncover any history of fraudulent activity or involvement in questionable ventures. This would ensure that investors are well-informed before committing to any project.

4. Whale Movements 

As BeInCrypto reported earlier, before the crash, a whale wallet reportedly associated with the MANTRA team deposited 3.9 million OM tokens into the OKX exchange. Experts highlighted that this wasn’t an isolated incident.

“Large OM transfers (43.6 million tokens, ~$227 million) to exchanges days prior were a major warning of potential sell-offs,” Forest Bai conveyed to BeInCrypto.

Ming Wu also explained that investors should pay close attention to such large transfers, which often act as warning signals. Moreover, analysts at CryptoQuant also outlined what investors should look out for.

“OM transfers into exchanges amounted to as much as $35 million in just an hour. This represented an alert sign as: Transfers into exchanges are below $8 million in a typical hour (excluding transfers into Binance, which are typically large given the size of the exchange). Transfers into exchanges represented more than a third of the total OM transferred, which indicates a high transfer volume into exchanges,” CryptoQuant informed BeInCrypto.

Strategies to Protect Yourself

CryptoQuant stated that investors need to monitor the flows of any token into exchanges, as it could indicate increasing price volatility in the near future.

Meanwhile, Risk Control Adviser Eric He outlined four strategies to stay up-to-date when it comes to large transfers.

Chain Sleuthing: Tools like Arkham and Nansen allow investors to track large transfers and monitor wallet activity.

Set Alerts: Platforms like Etherscan and Glassnode notify investors of unusual market movements.

Track Exchange Flows: Users need to track large flows into centralized exchanges.

Check Lockups: Dune Analytics helps investors determine if team tokens are being released earlier than expected.

He also recommended focusing on the market structure. 

“OM’s crash proved market depth is non-negotiable: Kaiko data showed 1% order book depth collapsed 74% before the fall. Always check liquidity metrics on platforms like Kaiko; if 1% depth is below $500,000, that’s a red flag,” Eric revealed to BeInCrypto.

Additionally, Phil Fogel underlined the importance of monitoring platforms like X (formerly Twitter) for any rumors or discussions about possible dumps. He stressed the need to analyze liquidity to assess whether a token can handle sell pressure without causing a significant price drop.

5. Centralized Exchange Involvement 

After the crash, MANTRA CEO JP Mullin was quick to blame centralized exchanges (CEXs). He said the crash was triggered by “reckless forced closures” during low-liquidity hours, alleging negligence or intentional positioning. Yet Binance pointed to cross-exchange liquidations.

Interestingly, experts were slightly divided on how CEXs contributed to OM’s crash. Forest Bai claimed that CEX liquidations during low-liquidity hours worsened the crash by triggering cascading sell-offs. Eric He corroborated this sentiment.

“CEX liquidations played a major role in the OM crash, acting as an accelerant. With thin liquidity—1% depth falling from $600,000 to $147,000—forced closures triggered cascading liquidations. Over $74.7 million was wiped in 24 hours,” he mentioned.

Yet, Ming Wu called Mullin’s explanation “just an excuse.” 

“Analyzing the open interest in the OM derivatives market reveals that it was less than 0.1% of OM’s market capitalization. However, what’s particularly interesting is that during the market collapse, open interest in OM derivatives actually increased by 90%,” Wu expressed to BeInCrypto.

According to the executive, this challenges the idea that liquidations or forced closures caused the price drop. Instead, it indicates that traders and investors increased their short positions as the price fell.

Strategies to Protect Yourself

While the involvement of CEXs remains debatable, the experts did address the key point of investor protection.

“Investors can limit leverage to avoid forced liquidations, choose platforms with transparent risk policies, monitor open interest for liquidation risks, and hold tokens in self-custody wallets to reduce CEX exposure,” Forest Bai recommended.

Eric He also advised that investors should mitigate risks by adjusting leverage dynamically based on volatility. If tools like ATR or Bollinger Bands signal turbulence, exposure should be reduced.

He also recommended avoiding trading during low-liquidity periods, such as midnight UTC, when slippage risks are highest. 

The MANTRA (OM) collapse is a powerful reminder of the importance of due diligence and risk management in cryptocurrency investments. Investors can minimize the risk of falling into similar traps by carefully assessing tokenomics, monitoring on-chain data, and diversifying investments.

With expert insights, these strategies will help guide investors toward smarter, more secure decisions in the crypto market.