Celsius Network Partly Caused UST’s Collapse: Nansen

UST’s demise sent tremors through the cryptocurrency world. And according to researcher Nansen, they can’t trace it back to a single perpetrator. Rather, they discovered the trades of a limited number of traders, one of whom was the Celsius Network.

There were expectations for UST to preserve its USD-peg. By using algorithms and trade rewards. Including a companion coin called Luna, constructed on the Terra blockchain. They expected UST to preserve its dollar peg utilizing algorithms and trade incenives. 

Also, they made a companion coin called Luna on the Terra blockchain. It gained traction once users discovered that lending it on Terra’s Anchor Protocol might earn them up to 20% interest. But, selling pressure created a “death spiral” earlier in May. It plummeted UST and Luna and wiped out over 40B dollars in market value. Many coins have fallen in value due to the collapse of the market.

Terra’s Problems Are Being Investigated

According to Nansen, they reject the conventional narrative. The one claims that a single attacker was attempting to undermine UST from 7th-11th May. The de-peg of UST could have resulted from different well-funded corporations’ investment options. 

It helps to follow risk-management limitations. Or otherwise, reduce UST allocations put in Anchor. But, to get conducted in unpredictable macroeconomic and market situations. Nansen believes the coin’s downfall resulted from the breaching of the coin’s $1-to-$1 peg to the USD. Even if you don’t want to trade, deliberately disrupt them.

Nansen’s Investigation into the UST Peg Drop

Nasen found that certain users gained from arbitrage bets. On the difference in UST’s price on the Curve lending app. But against centralized and decentralized exchanges. After Do Kwon mocked users’ worries in a tweet, the Curve inflows and outflows debate heated up.

Curve acquired 150M UST from a wallet linked to the LFG. Kwon was one of the founders. He was also in charge of UST’s peg protection. 4 wallet addresses, one of which had relations to Celsius, then sent 105M UST to Curve. The back-and-forth lasted into the morning of 8th May, Nansen said. He added that LFG retaliated by withdrawing USTs.

Investors started withdrawing UST from Anchor Protocol. Moving the funds to ETH using the Wormhole bridge. They used Curve’s arbitrage between centralized and decentralized exchanges to make money. To buy and sell large amounts of UST for other stablecoins. This year, Nansen claims that outflows from Anchor began in mid-April. 

Nansen says wallet addresses related to Celsius had a major effect on the UST de-pegging. There’s an estimation that both addresses accounted for the majority of the withdrawals. They amounted to around 420M UST from Anchor for 15 actions. This wallet’s activity led to the de-pegging. Celsius was an important counterparty in those transactions.

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