PiggyBank has closed its hedge tied to LAB after extreme price swings and deeply negative funding rates made the trade too costly to maintain. According to reports from crypto.news, the DeFi yield protocol said the move will reduce the net asset value of several vaults, including an estimated 15% drawdown for its USDC product. The protocol opened the position about one month earlier with $100,000, equal to roughly 2% of its portfolio at that time. The strategy involved buying locked LAB tokens at a discount through an over-the-counter desk and shorting LAB perpetual contracts to offset price risk.
PiggyBank valued its locked LAB position at about $1.35 million using current prices, but the protocol removed that holding from its net asset value calculation because the tokens cannot yet be sold. As reported by crypto.news, the first unlock is scheduled for August 14. The protocol expects its USDC vault to show an estimated 15% drawdown, while SPYx could record a 12% decline and JitoSOL could fall 9%. These figures reflect the accounting treatment announced by the protocol and may change when the locked LAB tokens begin unlocking.
PiggyBank said LAB then faced "violent manipulation," thin liquidity and deeply negative funding rates. According to crypto.news, those conditions raised the cost of keeping the short open. The protocol said maintaining the hedge had become "economically irrational," so it closed the short to limit further losses. The protocol acted before the position crossed its internal risk limits, as reported by crypto.news.
On-chain investigator ZachXBT criticized the trade and questioned why user funds gained exposure to LAB. As reported by crypto.news, he said the protocol had lost user assets by "gambling on blatant scam coins." His response followed earlier claims about the token's ownership and trading activity, including allegations in May that LAB-linked insiders controlled more than 95% of supply and had hidden key distribution details. These claims remain allegations, and the available PiggyBank statement did not address LAB's token distribution, focusing instead on the hedge and funding costs.
PiggyBank said it will publish a detailed report with its next steps, but the team has not yet released that report publicly. According to crypto.news, the coming update may provide trade records, risk thresholds, loss calculations and plans for the August unlock. Users currently have limited information on the final recovery value of the LAB position, as the locked tokens could regain value before release or trade lower. The protocol's next report will determine how it records future changes and manages the affected vaults across its three products.
