The collapse of the stablecoin terraUSD (UST), as well as the entire Terra ecosystem, was provoked by only two traders. About this in my report. reported analysts at Chainalysis.
According to experts, it all started on the night of May 7, when Terraform Labs, as part of a planned operation, withdrew 150 million UST from the 3pool liquidity pool based on Curve. Such a large and one-time operation, according to analysts, increased the volatility of the pool.
Just thirteen minutes later, a major trader spotted this loophole and exchanged 85 million UST for USDC to add to the volatility. Over the next hour, another trader converted a total of 100 million UST into USDC in four staggered transactions, adding to the volatility.
In response to these actions, Terraform Labs withdrew another 100 million UST from 3pool. It is claimed that this was done in order to “balance” the ratio of UST in relation to other stablecoins. However, by this time, the above large transactions, as well as many smaller ones, had already broken the UST peg to the US dollar.
On the same day, and on May 8 and 9, three unknown UST supporters converted tether (USDT) into UST for a total of $480 million in order to save the project and balance 3pool. Also on May 9, the Luna Foundation Guard (LFG) sold billions of dollars worth of bitcoin to be converted into UST. However, already on May 10, LFG reserves were depleted, and the UST rate still collapsed.
Recall that the UST rate in the UST/USD pair fell from $1 to $0.12 in early May. The native token of the Terra ecosystem was also hit, losing 100% in price in the LUNA/USD pair.
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