Nansen, a blockchain analytics business, claims that TerraUSD’s “death spiral” was caused by a sell-off by many parties.
The recent de-pegging of TerraUSD, which included DeFi lender Celsius Network, was carried out by numerous organisations, according to research company Nansen. The analytical company says it “refutes the conventional notion of one attacker” or “hacker” seeking to disrupt UST.”
Luna, the USDTerra’s stablecoin sister, was used to preserve the coin’s peg, unlike stablecoins like Tether (USDT) and Circle (USDC). Staking UST in Anchor Protocol, a crypto-bank, yielded investors a 20% yearly return. This month’s algorithmic failure wiped out almost $40 billion from the crypto market and placed more pressure on other cryptocurrencies, like UST and LUNA.
Indications point to “wealthy entities,” Because of the turbulence in the macroeconomic and financial conditions, the de-peg of UST could have resulted from the investment decisions of a number of well-funded entities, such as those made to adhere to risk-management constraints or, alternatively, those made to reduce the UST allocations deposited into Anchor. Such investments may or may not be the product of nefarious conduct, according to Nansen’s remarks.
DeFi lending tool Curve and centralised exchanges like Coinbase provided arbitrage opportunities for certain customers.
Curve Finance stole $150 million from the Luna Foundation Guard (LFG), a reserve fund established to preserve UST’s peg. There were $105 million in UST deposits and LFG withdrew additional money. May 8, 2022, saw another round of back and forth. As a result, a number of significant UST holders began changing their tokens to Ethereum. In order to take advantage of price disparities on controlled exchanges, decentralised exchanges, and curves, users started trading UST for other stablecoins using Curve Finance.
One of the two wallets that drained $420 million from Anchor has been connected to Celsius, and the Wormhole Bridge has been used to move the cash to Ethereum. The de-pegging of Terra was also influenced by the activities of Celsius, a wallet connected to other wallets.
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