A new Nansen report argues that on-chain metrics are seven different wallets that destabilize the UST by selling large amounts of cryptocurrencies to relatively illiquid Curve liquidity pools. However, the report does not support the idea that the LUNA crash was caused by a malicious attack.
Are these seven wallets behind the LUNA and UST collapse?
A new on-chain research by Nansen suggests that Terra’s UST depeg may have been initiated by a small number of players. According to the report, seven major wallets withdrew UST funds from Anchor Protocol on Terra on May 7 and bridged these funds from Terra to Ethereum via Wormhole and exchanged UST for USDC in Curve’s liquidity pools. The relative lack of liquidity in the pools securing UST to other stablecoins then triggered the depegging process.
The report comes three weeks after Terra stablecoin UST lost its anchor. The crash sent the price of the LUNA token from $77 to $0.0014 and wiped out more than $43 billion from the crypto market. On-chain data also shows that when the UST began to lose its stable, seven wallets benefited from arbitrage differences between Curve, decentralized exchanges and centralized exchanges (especially Binance).
Nansen’s report rebuffs the narrative that the destabilization of the IHR was caused by a single aggressor, suggesting that it ‘may result from the investment decisions of several well-funded institutions’ to manage risk. He points to the existence of alert systems that allow funds to detect transactions exceeding $20 million entering and exiting Curve pools.
Nansen-identified seven wallets, one to crypto company Celsius, two to ‘Token Millionaires’ (i.e. wallets with a token balance north of $1 million) and two to ‘Heavy DEX Traders’ (number of transactions or transactions on decentralized exchanges) wallets in the top 1% by volume).
Nansen, however, does not confirm or deny whether the destabilization of the UST was coordinated off-chain. The analysis also limits itself to Terra and Ethereum and does not take into account exits for other blockchains such as Solana or BNB Chain.
As we have repeatedly announced as Kriptokoin.com, Terra plans to launch a second version of Blockchain on May 28, 2022.
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