PiggyBank price drops 15% after closing LAB position

The investment fund PiggyBank has announced that it is closing a speculative position in LAB tokens following extreme price fluctuations and unfavourable market conditions. The fund is excluding the locked LAB tokens from the net asset value (NAV) calculation until they become available in August, leading to significant declines across several vaults.

Speculative trade spirals out of control

A month ago, PiggyBank placed approximately $100.000 in LAB tokens. It involved a mid-cap basis trade in which the fund bought locked LAB tokens at a considerable discount through a tier-1 OTC desk. To hedge against this risk, PiggyBank opened short positions via perpetual contracts.

The situation quickly escalated, however. LAB underwent a period of heavy manipulation with chaotic price movements on thin liquidity. The funding rates, through which position holders compensate each other, turned strongly negative. Ultimately, it proved economically unviable to maintain the hedge without exceeding risk limits. PiggyBank therefore closed the short positions to cap further losses.

Significant declines in multiple vaults

Although the locked LAB tokens are worth roughly $1.35 million on paper at current prices, this capital remains inaccessible until 14 August. Because of this illiquid nature, PiggyBank is keeping the position outside the NAV calculation until the first tranche is released.

This approach results in significant declines: the USDC vault drops by approximately 15%, SPYx by 12% and JitoSOL by 9%. The fund reports that a detailed report with information on next steps will follow next week.

The matter raises questions about the exposure of user funds to highly speculative investments. Analyst ZachXBT has already criticised the strategy, pointing out the risks of such transactions.