Analytics company Nansen denied that the Terra ecosystem collapsed intentionally

Home / Analytics company Nansen denied that the Terra ecosystem collapsed intentionally

Analyst firm Nansen has released a detailed report on the trading activity that led to the decoupling of the terraUSD (UST) steblecoin from the U.S. dollar. According to the report, the fall of UST occurred as a result of the actions of several major players, who found further storage of tokens too risky.
“We refute the popular narrative that there is a separate “miscreant” or “hacker” who worked to destabilize UST. The UST unbundling may have been the result of investment decisions by several well-funded institutions that, for risk-limiting reasons, reduced allocations in USTs placed in Anchor’s lending protocol. This occurred against a backdrop of rapid macroeconomic changes and market conditions,” the company said.
Nansen identified seven purses that put significant pressure on USTs. The company believes they all belong to different institutions. One of those wallets belongs to cryptocurrency platform Celsius.
Analysts found that between May 7 and 11, “whales” independently began actively exchanging their USTs for USDC or other assets through the Curve liquidity pool. It was on this protocol that the USTs were decoupled from the dollar.
Luna Foundation Guard tried to hold the peg by buying up the entire supply of seven wallets, but the supply was too large and LFG simply did not have the resource to buy back the asset.
Concerned UST holders later joined in this activity and opted to withdraw funds from the stablocoin at $0.97 or $0.98.
The arbitrageurs’ actions exacerbated the situation and led to the hyperinflation of the LUNA token, which balanced the price of UST. Luna and UST then plunged into a “death spiral.”
Earlier, FTX CEO Sam Bankman-Fried suggested that large investors were aware that Terra ecosystem tokens could fall at some point and were willing to withdraw their funds if the situation destabilized.
Nansen concluded that the UST token could not have continued to exist quietly because large and small holders of the asset had significant doubts about its viability, which actually led to the “death spiral.”

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