Key Takeaways:
Berachain surged to $14.83 before crashing 50% within hours, raising insider trading and market manipulation concerns. Anonymous founders and an unfair airdrop, in which some users received nothing while others claimed millions, fueled scam accusations. Despite strong investor backing, Berachain’s future depends on how founders address allegations of unfair practices.Berachain (BERA) has completed its mainnet after two years of testing. BERA first surged, then crashed by almost 50%. What went wrong?
At first glance, Berachain performed well, especially until February 2025, when the airdrop details were revealed. In April 2023, the project raised $42 million in funding during the first round, with Polychain Capital as the main sponsor.
In the second round in April 2024, Berachain received approximately $100 million, with Framework Ventures as the main sponsor. At this time, the project introduced the Artio public testnet, possibly boosting investor confidence.
One of the first concerns is the complete anonymity of Berachain’s creators. It is known that there are four people (possibly more) using the pseudonyms Homme Bera, Dev Bear, Papa Bear, and Smokey the Bera.
Smokey the Bera gave a short interview to The Block in April 2023 after the first round of funding. They mentioned that the founders of Berachain know each other and are located in Toronto.
Smokey the Bera also stated that one of the project’s sponsors was Celestia co-founder Mustafa Al-Bassam. This may relate to Berachain’s use of the Cosmos SDK, as Celestia is also part of this ecosystem.
The crypto community initially had high expectations for the project, labeling it a potential “killer” of Ethereum (ETH) and Solana (SOL). However, as the airdrop approached, disappointment and criticism grew.
According to Berachain, 48.9% of tokens were allocated to the community, with 15.8% set aside for the airdrop. This percentage is considered a gold standard in the crypto community. Additionally, 20% was allocated to ecosystem participants.
However, a significant 34.3% was reserved for investors. This allocation has led to criticism and accusations of Berachain being a scam.
Source: BerachainWinners and Losers: Some Got 0 BERA, Others Scored 1.5 Million BERA
The day before the airdrop, the first results of claim tokens of those who took part in the Berachain network began to appear.
Crypto researcher Aylo shared that he received 694 tokens during the distribution. However, not everyone was so lucky.
Wonnie, Founder of BMB, identified a user with a large number of roles in Berachain. In other words, this user performed many activities, which gives a chance to receive more tokens. As a result, this profile received zero tokens.
Special attention was drawn to user X under the nickname CBB, who received almost 1.5 million BERA tokens. In the crypto community, this user began to be called an insider.
Also, one of the centers of attraction for disputes became the system of three Berachain tokens:
BERA is the main token that serves as payment for gas transactions. BGT is a token for the management of decentralized autonomous governance (DAO). Users can stake BERA to get BGT. HONEY is like a stablecoin for the Berachain ecosystem, pegged 1:1 to the U.S. dollar.Yago, a crypto trader, noted that this system could benefit insiders (or investors). They can send their BERA for staking, get BGT, vers in return, and sell BERA.
Accordingly, the more BERA a user has, the more the user can stake these tokens and get BGT (and more).
‘Don’t Buy BERA’
On Feb. 6, 2025, the Berachain token launched and began trading on crypto exchanges. In the first hours, BERA rose from $14.83 to become an all-time high (ATH). Then, the price fell sharply to $6.96.
BERA fell by more than 50% in a couple of hours despite the initial surge.
Source: CoinGeckoUsers began dumping BERA en masse. This led to many trying to profit through short positions, with Hyperliquid (HYPE), a new decentralized exchange (DEX), becoming the main platform. This also indicated the activity of whales, possibly insiders or early investors.
Lookonchain noticed one whale who added about 1.6 million USDC to Hyperliquid to open a short position, resulting in a $589,000 profit.
Some X users noted that traders were paying around 0.7% per hour to open a short position on Hyperliquid, a very high rate.
This increase could indicate significant interest in short positions and raise suspicions of insider information or market manipulation. Many traders appeared to anticipate the price drop.
At the time of writing, the interest rate for a short position on BERA on Hyperliquid has dropped to 0.0013%.
Source: HyperliquidAmid growing suspicions around Berachain, a slogan appeared on X: “Don’t buy BERA.”
Can Berachain Really Be Called a Scam?
Insider trading and scams are not always the same, although insider information can be part of a financial pyramid.
Berachain offers a Layer 1 (L1) protocol. Instead of Proof of Work (PoW) or Proof of Stake (PoS), developers use Proof of Liquidity (PoL).
Proof of Liquidity is an alternative to Proof of Stake, as PoS can face liquidity problems since tokens are locked for staking for a certain period. Although it is considered promising, Proof of Liquidity is not yet widespread in the crypto market.
Berachain project allows users to receive rewards for providing liquidity through BGT (Berachain Governance Tokens). These tokens play a key role in the ecosystem. Users can stake them while simultaneously using them to provide liquidity in other decentralized finance (DeFi) protocols. BGT is also needed to reward stakers.
Perhaps for this reason, Berachain has been called the ‘killer’ of two major DeFi blockchains: Ethereum and Solana. Additionally, the involvement of serious and well-known investors has inspired confidence.
Crypto researcher Beanie believes 75-85% of tokens belong to Berachain’s founders. The scandal and accusations could have been avoided if this information had been disclosed. Moreover, this fact contradicts the claim that BERA is part of a DAO.
However, some remain optimistic and do not consider what happened to Berachain a collapse.
But the events on BERA’s first trading day have hurt Berachain’s reputation, especially the “unfair” airdrop. To understand the project’s future, we must see if its founders respond to the accusations or stay silent.
Even if the project does not survive this token launch, other DeFi protocols may use its concept to address low liquidity issues.
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