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PiggyBank said it closed a short hedge against token LAB after extreme volatility and punishing negative funding rates made the position unsustainable, and warned users that NAV across its vaults will take the hit. The protocol expects roughly 15% drawdowns on its USDC vault, 12% on SPYx, and 9% on JitoSOL, while also excluding its locked LAB holdings from NAV until August unlock windows. Locked-token treatment is a recurring friction point for DeFi treasuries: when the NAV formula marks illiquid vesting positions, depositors absorb the volatility instead of the holder.
On-chain investigator ZachXBT publicly criticized the underlying strategy, arguing it exposed user funds to a highly speculative asset through a hedge structure that broke down precisely when it was supposed to pay. The critique lands at a moment when DeFi yield products are under closer scrutiny after a string of yield-token and basis-trade failures across the sector.
Why it matters
A hedge unwind at a drawdown this size is the worst-case path: the position was meant to protect the book, and instead the funding-cost bleed forced a sale into a falling market. For users still sitting in the vaults, the question is whether the remaining strategy is rebuilt around a safer reference asset — or whether the protocol doubles down on the same bet that just failed. The August LAB unlock is the next concrete catalyst; how those tokens are treated in NAV from that point forward will determine whether the 9-15% drawdown is the full damage or just the first instalment.
Frequently asked questions
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What happened to PiggyBank's LAB hedge?
PiggyBank said it closed a short hedge against token LAB after extreme volatility and deeply negative funding rates made the position unsustainable, forcing an unwind into a falling market.
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How large are the reported NAV drawdowns?
The protocol expects roughly 15% drawdowns on its USDC vault, 12% on SPYx, and 9% on JitoSOL, while excluding locked LAB holdings from NAV until August unlock windows.
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Why is ZachXBT criticizing PiggyBank?
On-chain investigator ZachXBT argued the strategy exposed user funds to a highly speculative asset through a hedge structure that broke down precisely when it was supposed to protect the book.
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Why is locked LAB being excluded from NAV?
The protocol is excluding its locked LAB from NAV calculations until the August unlock windows — a recurring friction point when illiquid vesting tokens are marked in a NAV formula.
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What is the next catalyst for PiggyBank users?
The August LAB unlock is the next concrete event — how those tokens are treated in NAV from that point forward will determine whether the 9-15% drawdown is the full damage or just the first instalment.
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