Thursday, December 1, 2022

Nansen Report: Seven Wallets Could Have Caused The Terra Collapse

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A new Nansen report shows that seven wallets could have caused the recent Terra collapse and the UST depeg which might have been the consequence of savvy risk management so let’s read more today in our latest cryptocurrency news.

The new Nansen report claims seven wallets triggered the UST depeg and the lack of liquidity in the curve protocols securing the UST to other stablecoins initiated the price destabilization. Nansen pushed back on the idea of malicious attacks arguing the Terra meltdown could have been the result of the huge funds practicing risk management. The report argued that the on-chain metrics show wallets destabilized UST by selling large amounts of the coin into illiquid Curve liquidity pools but the reports pushed back against the idea that the collapse was brought on by a huge attack.

The new on-chain investigation suggests that the Terra UST depeg could have been initiated by the smaller number of players. According to the report, seven wallets withdrew UST funds from the Anchor Protocol on Terra on May 7 and bridge the funds from the Terra to Etheruem via Wormhole, and then swapped UST for USDC in the Curve liquidity pools. The lack of liquidity in the pools secured UST to other stablecoins which initiated the debugging process. The report came three weeks after the Terra stablecoin lost the peg and sent the LUNA token price from $77 to $0.00014 and erased $43 billion dollars from the market.

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The data also suggests that seven wallets exploited arbitraging the inefficiencies between Curve and decentralized exchanges but also centralized exhcnages as UST started losing its peg. Nansen’s report pushed back on the narrative that UST’s destabilization was caused by one attacker, arguing that it could have resulted from the investment decisions on well-funded entities and to manage risk. It points to the existence of the alert systems and enable funds to detect tranactions of up to $20 million in and out of the Curve pools.

Out of the seven wallets identified by Nansen, one was labeled to belong to Celsius, two to Token Millionaires, and two to Heavy DX traders. Nansen however is not able to confirm or deny whether the SUT de-pegging had been coordinated off-chain. The analysis restricts itself to Terra and Ethereum which doesn’t take into account the outflows to other chains like Solana or BNB chain.

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