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According to a recent Nansen research, seven distinct wallets destabilized UST by selling huge quantities of the currency into very illiquid Curve liquidity pools, according to on-chain measurements.
The analysis, however, refutes the notion that the collapse was caused by an intentional attack.
The Seven Wallets
According to Nansen’s fresh on-chain study, Terra’s UST depeg may have been launched by a small group of people.
On May 7, seven main wallets withdrew UST money from the Anchor protocol on Terra, bridged these assets from Terra to Ethereum via Wormhole, and traded UST for USDC in Curve’s liquidity pools, according to the study.
A lack of liquidity in the pools that secure UST to other stablecoins sparked the depegging process.
The news comes three weeks after the Terra stablecoin lost its peg, sending the LUNA token’s price falling from $77 to $0.00014 and wiping away more than $43 billion in the crypto market.
On-chain data suggests the seven wallets took advantage of arbitraging inefficiencies between Curve, decentralized exchanges, and centralized exchanges when UST began to lose its peg (particularly Binance).
Nansen’s analysis argues that UST’s instability might have “resulted from the investment decisions of numerous well-funded groups” in order to manage risk, refuting the narrative that it was caused by a single attacker.
“Token Millionaires”
It notes the existence of detection techniques that allow funds to track transactions of more than $20 million in and out of Curve pools.
One wallet belongs to crypto company Celsius, two to “Token Millionaires” (those with a token balance of more than $1 million), and two to “Heavy DEX Traders,” according to the report. Nansen claims that (wallets are in the top 1 percent in terms of the number of trades or volume traded on decentralized exchanges).
Despite this, Nansen is unable to confirm or reject if the UST instability was managed off-chain.
The research is also limited to Terra and Ethereum and does not account for outflows to other networks like Solana or the BNB chain.
On May 28th, 2022, at 6:00 a.m. UTC, Terra plans to launch a new version of its blockchain.
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With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
