The largest algorithmic stablecoin, TeraUSD (UST), suddenly disintegrated last week, sending shockwaves through the crypto markets. As UST plunged significantly below its $1 peg, it put pressure on Bitcoin and the crypto market as a whole. Luna, its sister cryptocurrency, has also nearly halved in value.
So what?
Cryptocurrency forensics business, Nansen, identified four phases of de-peg of the Terror/USD (UST) stablecoin for the US dollar, which took place two weeks ago. According to the full Nansen report released today on May 27, 2022, the hypothesis that UST was attacked by a powerful entity that has been widely debated on Crypto Twitter is nonsense.
Instead, seven major wallets (skilled traders, “token millionaires,” and so on) examined the imbalanced state of the UST-tokenomic Luna’s design.
Most likely they started taking UST liquidity out of the Anchor Protocol on May 7, 2022. (ANC). The protocol offers an APY of up to 19.5 percent on the UST stablecoin before the Terra (LUNA) crisis. Then, using the wormhole bridge infrastructure, they began aggressively moving liquidity from the Terra (LUNA) blockchain to Ethereum (ETH).
Nansen disclosed the addresses of seven whale-operated wallets that were crucial to the transaction. They were labeled as “token millionaires” and “heavy dex traders” using Nansen’s algorithm.
Finally, on the Curve Finance (CRV) liquidity pool, the above accounts started trading USTs for other stablecoins. Significant arbitrage opportunities arose after UST was de-pegged, due to “inefficiencies” between different price sources.
As a result of recent events, both the UST stablecoin and the Terra (LUNA) asset have plummeted to near-zero prices. Do Kwon was the founder of Terraform Labs who revamped the network.
After a few days of decline, bitcoin climbed above the $30,000 level on Saturday before rallying. The entire bitcoin market has also declined in the last 24 hours. UST, on the other hand, is still well below $1.
