Alpaca Finance, a decentralized lending platform, announced its shutdown today, citing ongoing financial struggles. After four years of operation on BNB Chain and Fantom, the platform will sunset all products. The decision follows a turbulent period marked by Binance’s delisting and market volatility.
What Forced the Closure?
On May 2, 2025, Binance made the decision to delist Alpaca’s native token, ALPACA, which resulted in significant disturbance within the crypto market. Following the announcement, the exchange implemented a dramatic increase in funding rates, raising them from a previously stable ±2% to a concerning ±4%. Additionally, Binance shortened the settlement intervals from the standard four hours down to a mere one hour.
These changes had immediate and profound consequences, significantly raising the costs for short sellers caught off guard. This led to a series of liquidations, with the total value surpassing an astonishing $55 million in hours. The market reacted with extreme volatility; ALPACA initially soared by an incredible 1,100%, only to experience a swift and devastating crash shortly thereafter.
This drastic fluctuation overwhelmed the platform’s operational capabilities, causing disruptions that worsened the chaos. In light of these unbearable financial pressures and the operational strain they imposed, Alpaca’s team cited these factors as pivotal in their decision to shut down, marking a turbulent chapter in the crypto landscape.
Whale Manipulation Amplifies Alpaca’s Woes
Whale activity played a critical role in Alpaca Finance’s financial difficulties, worsening market chaos. Large players reportedly accumulated ALPACA tokens at a low of $0.02, which artificially drove prices up to $1.47.
This manipulation, likened to the 2021 GameStop short squeeze, led to $43 million in short liquidations. Analyst Budhil Vyas called it “textbook liquidity hunting,” with whales exploiting low liquidity for profit. Such tactics likely destabilized Alpaca’s ecosystem, contributing to the decision to cease operations.
Alpaca Finance’s closure marks a mournful end for a once-promising DeFi platform. The shutdown reflects broader challenges in the volatile crypto market.
