Mystery Of $40 Billion Terra Luna Crash Deepens With Possible Role Of Former FTX CEO In Its Collapse

Barely a month after the FTX collapse jolted the already struggling crypto market, its been examined that the Terra Luna crash of May 2022 might be linked to this. FTX collapse has prompted a reexamination of the implosion of the Terra algorithmic stablecoin ecosystem, which had wiped out around $40 billion in market value earlier this year.

Vanya GautamUpdated: Dec 09, 2022, 18:54 IST
6 min read
binance backs out of ftx deal
headtopics

It¡¯s barely been a month since the FTX collapse jolted the already struggling crypto market. And now, there¡¯s another twist in the downfall of crypto ¡®robinhood¡¯ Sam Bankman-Fried.

FTX collapse and the revelations around how investors¡¯ money was misused, has prompted a re-examination of the implosion of the Terra algorithmic stablecoin ecosystem. Terra Luna crash had wiped out around $40 billion in market value earlier this year.

FTX's Possible Involvement In Terra Luna Crash

terra luna shutterstock

US prosecutors are said to be investigating Bankman-Fried, the founder of collapsed crypto exchange FTX and its sister trading platform Alameda Research, regarding his possible involvement in orchestrating the death spiral of TerraUSD (UST) and its affiliated token Luna, according to a report in the New York Times citing people with knowledge of the matter.

Separately, Bloomberg also reported that FTX¡¯s new CEO and bankruptcy lawyers had met this week with Manhattan federal prosecutors investigating the failed exchange.

The Terra ecosystem was helmed by the symbiotic relationship between the two tokens that was managed by lines of automated code to govern circulation. If the price of UST went above $1, traders were incentivized to swap Luna for UST at a profit, and vice versa, thus in theory keeping UST¡¯s circulation in check.

But when investors lost confidence in one, the other went down too, and so they were locked in a so-called death spiral that saw their value plummet to nearly zero in a week¡¯s time in May.

FTX founder Sam Bankman Fried Bloomberg

However, whose actions helped precipitate that decline has remained in question since then. There were two sides to this trade, as per Bloomberg report.

The first is the side that traders can see on-chain, where wallet addresses were visibly swapping UST for other tokens, and that caused the market to start to panic. The other is on centralized exchanges¡¯ order books, where the ¡°who¡¯s who¡± is harder to track because user information is not disclosed by platforms.

¡°People are often seeing half the picture,¡± Nikita Fadeev, partner at London-based crypto fund Fasanara Digital, had reportedly said in a message Thursday. ¡°Even blockchain data wouldn¡¯t necessarily tell you the whole picture, and can muddy the water in terms of the ability to interpret the data.¡±

Also Read: Binance CEO Says He's 'Poor Again' After Terra Luna Holdings Crash

Terra¡¯s Collapse In May

In early May this year, signs of unease about UST¡¯s stability had begun to emerge. Anchor, a decentralised lending protocol on the Terra blockchain, reduced the yields it offered to clients to 18%, implying that it had started to feel the brunt of offering unsustainable rates to traders willing to lock up their tokens.

On May 7th, UST¡¯s issuer Terraform Labs withdrew $150 million in UST liquidity from Curve, a platform that offered a pool where investors could swap UST for other stablecoins such as USDC at equal value.

Do Kwon, Terraform¡¯s founder, said this was a preparatory move ahead of deploying more cash into the pool in a week¡¯s time, as per the report.

But just one minute later, an unknown wallet swapped $84 million in UST from the pool for USDC. And that wallet wasn¡¯t the only one swapping out their UST, with 12 others also moving tokens between May 7 and May 8, to the tune of $321 million. Seven of those wallets had been withdrawing UST from Anchor as early as January, data analytics firm Nansen said, and as the stablecoin started to spiral in May, the main $84 million perpetrator withdrew around $193 million in UST from Anchor.

Terraform¡¯s founder inferred Thursday on Twitter that FTX's sister firm Alameda had been involved in pushing down the value of TerraUSD (UST).

ftx former ceo role in terra luna crash indiatimes

As per the report, suffice to say, all the moves in May imbalanced the Curve pool, which by that point had more UST than any of the other three tokens. Terraform¡¯s Luna Foundation Guard ¡ª a fund established to raise money for the sole purpose of keeping UST worth $1 ¡ª leapt into action, removing $100 million in UST from the pool. In order to do that, it had to sell Bitcoin it kept in reserves for exactly this purpose, a process which coupled with declining market sentiment, pushed the price of Bitcoin down by 29% that week.

This was taking place as LFG and Terraform Labs were already in fire-fighting mode, expending a lot of stored crypto cash in a bid to keep UST and Luna from dropping to zero. They weren¡¯t successful either, with panic swapping and $10 billion in withdrawals from Anchor making it impossible for the LFG to balance the scales.

While most UST activity was happening on decentralised protocols like Anchor and Curve in May, there was also still a bit of action on centralised exchanges like Binance, FTX and others. The only problem was that as UST and Luna¡¯s prices began to come under pressure, virtually all liquidity for UST on major exchanges evaporated.

What The Data Showed

terra coingecko

Data collated by blockchain analytics firm Kaiko at the time showed that on May 8, a huge round of ¡°sell¡± orders appeared on Binance for a pair that would trade UST and another stablecoin, Tether¡¯s USDT. On the same exchange, the ¡°ask¡± side of UST¡¯s order book increased, which would have made it really difficult for the token to re-peg to the dollar.

¡°Ultimately, the poor liquidity on centralized exchanges likely played a huge role in UST¡¯s depegging, along with a series of events exacerbated by a rush of UST out of Anchor,¡± Kaiko¡¯s Riyad Carey wrote at the time, as per Bloomberg report.

Kaiko also found that funding rates and volumes suggested that someone was aggressively shorting Luna. But because the LFG was so focused on spending Bitcoin to help shore up UST on Anchor and Curve, there was relatively little left to match the massive sell wall that its price was facing on exchanges.

The bulk of those ¡°sell¡± orders against UST appeared to be coming from FTX's sister trading platform Alameda, the person cited by the New York Times said.

Also Read: Binance Sees 30% Surge In Trading Activity After FTX Collapse

For the latest and interesting financial news, keep reading Indiatimes Worth. Click here

25/11/2024 10:32:56
seductrice.net
universo-virtual.com
buytrendz.net
thisforall.net
benchpressgains.com
qthzb.com
mindhunter9.com
dwjqp1.com
secure-signup.net
ahaayy.com
tressesindia.com
puresybian.com
krpano-chs.com
cre8workshop.com
hdkino.org
peixun021.com
qz786.com
utahperformingartscenter.org
worldqrmconference.com
shangyuwh.com
eejssdfsdfdfjsd.com
playminecraftfreeonline.com
trekvietnamtour.com
your-business-articles.com
essaywritingservice10.com
hindusamaaj.com
joggingvideo.com
wandercoups.com
wormblaster.net
tongchengchuyange0004.com
internetknowing.com
breachurch.com
peachesnginburlesque.com
dataarchitectoo.com
clientfunnelformula.com
30pps.com
cherylroll.com
ks2252.com
prowp.net
webmanicura.com
sofietsshotel.com
facetorch.com
nylawyerreview.com
apapromotions.com
shareparelli.com
goeaglepointe.com
thegreenmanpubphuket.com
karotorossian.com
publicsensor.com
taiwandefence.com
epcsur.com
southstills.com
tvtv98.com
thewellington-hotel.com
bccaipiao.com
colectoresindustrialesgs.com
shenanddcg.com
capriartfilmfestival.com
replicabreitlingsale.com
thaiamarinnewtoncorner.com
gkmcww.com
mbnkbj.com
andrewbrennandesign.com
cod54.com
luobinzhang.com
faithfirst.net
zjyc28.com
tongchengjinyeyouyue0004.com
nhuan6.com
kftz5k.com
oldgardensflowers.com
lightupthefloor.com
bahamamamas-stjohns.com
ly2818.com
905onthebay.com
fonemenu.com
notanothermovie.com
ukrainehighclassescort.com
meincmagazine.com
av-5858.com
yallerdawg.com
donkeythemovie.com
corporatehospitalitygroup.com
boboyy88.com
miteinander-lernen.com
dannayconsulting.com
officialtomsshoesoutletstore.com
forsale-amoxil-amoxicillin.net
generictadalafil-canada.net
guitarlessonseastlondon.com
lesliesrestaurants.com
mattyno9.com
nri-homeloans.com
rtgvisas-qatar.com
salbutamolventolinonline.net
sportsinjuries.info
wedsna.com
rgkntk.com
bkkmarketplace.com
zxqcwx.com
breakupprogram.com
boxcardc.com
unblockyoutubeindonesia.com
fabulousbookmark.com
beat-the.com
guatemala-sailfishing-vacations-charters.com
magie-marketing.com
kingstonliteracy.com
guitaraffinity.com
eurelookinggoodapparel.com
howtolosecheekfat.net
marioncma.org
oliviadavismusic.com
shantelcampbellrealestate.com
shopleborn13.com
topindiafree.com
v-visitors.net
djjky.com
053hh.com
originbluei.com
baucishotel.com
33kkn.com
intrinsiqresearch.com
mariaescort-kiev.com
mymaguk.com
sponsored4u.com
crimsonclass.com
bataillenavale.com
searchtile.com
ze-stribrnych-struh.com
zenithalhype.com
modalpkv.com
bouisset-lafforgue.com
useupload.com
37r.net
autoankauf-muenster.com
bantinbongda.net
bilgius.com
brabustermagazine.com
indigrow.org
miicrosofts.net
mysmiletravel.com
selinasims.com
spellcubesapp.com
usa-faction.com
hypoallergenicdogsnames.com
dailyupdatez.com
foodphotographyreviews.com
cricutcom-setup.com
chprowebdesign.com
katyrealty-kanepa.com
tasramar.com
bilgipinari.org
four-am.com
indiarepublicday.com
inquick-enbooks.com
iracmpi.com
kakaschoenen.com
lsm99flash.com
nana1255.com
ngen-niagara.com
technwzs.com
virtualonlinecasino1345.com
wallpapertop.net
casino-natali.com
iprofit-internet.com
denochemexicana.com
eventhalfkg.com
medcon-taiwan.com
life-himawari.com
myriamshomes.com
nightmarevue.com
healthandfitnesslives.com
androidnews-jp.com
allstarsru.com
bestofthebuckeyestate.com
bestofthefirststate.com
bestwireless7.com
britsmile.com
declarationintermittent.com
findhereall.com
jingyou888.com
lsm99deal.com
lsm99galaxy.com
moozatech.com
nuagh.com
patliyo.com
philomenamagikz.net
rckouba.net
saturnunipessoallda.com
tallahasseefrolics.com
thematurehardcore.net
totalenvironment-inthatquietearth.com
velislavakaymakanova.com
vermontenergetic.com
kakakpintar.com
begorgeouslady.com
1800birks4u.com
2wheelstogo.com
6strip4you.com
bigdata-world.net
emailandco.net
gacapal.com
jharpost.com
krishnaastro.com
lsm99credit.com
mascalzonicampani.com
sitemapxml.org
thecityslums.net
topagh.com
flairnetwebdesign.com
rajasthancarservices.com
bangkaeair.com
beneventocoupon.com
noternet.org
oqtive.com
smilebrightrx.com
decollage-etiquette.com
1millionbestdownloads.com
7658.info
bidbass.com
devlopworldtech.com
digitalmarketingrajkot.com
fluginfo.net
naqlafshk.com
passion-decouverte.com
playsirius.com
spacceleratorintl.com
stikyballs.com
top10way.com
yokidsyogurt.com
zszyhl.com
16firthcrescent.com
abogadolaboralistamd.com
apk2wap.com
aromacremeria.com
banparacard.com
bosmanraws.com
businessproviderblog.com
caltonosa.com
calvaryrevivalchurch.org
chastenedsoulwithabrokenheart.com
cheminotsgardcevennes.com
cooksspot.com
cqxzpt.com
deesywig.com
deltacartoonmaps.com
despixelsetdeshommes.com
duocoracaobrasileiro.com
fareshopbd.com
goodpainspills.com
hemendekor.com
kobisitecdn.com
makaigoods.com
mgs1454.com
piccadillyresidences.com
radiolaondafresca.com
rubendorf.com
searchengineimprov.com
sellmyhrvahome.com
shugahouseessentials.com
sonihullquad.com
subtractkilos.com
valeriekelmansky.com
vipasdigitalmarketing.com
voolivrerj.com
zeelonggroup.com
1015southrockhill.com
10x10b.com
111-online-casinos.com
191cb.com
3665arpentunitd.com
aitesonics.com
bag-shokunin.com
brightotech.com
communication-digitale-services.com
covoakland.org
dariaprimapack.com
freefortniteaccountss.com
gatebizglobal.com
global1entertainmentnews.com
greatytene.com
hiroshiwakita.com
iktodaypk.com
jahatsakong.com
meadowbrookgolfgroup.com
newsbharati.net
platinumstudiosdesign.com
slotxogamesplay.com
strikestaruk.com
trucosdefortnite.com
ufabetrune.com
weddedtowhitmore.com
12940brycecanyonunitb.com
1311dietrichoaks.com
2monarchtraceunit303.com
601legendhill.com
850elaine.com
adieusolasomade.com
andora-ke.com
bestslotxogames.com
cannagomcallen.com
endlesslyhot.com
iestpjva.com
ouqprint.com
pwmaplefest.com
qtylmr.com
rb88betting.com
buscadogues.com
1007macfm.com
born-wild.com
growthinvests.com
promocode-casino.com
proyectogalgoargentina.com
wbthompson-art.com
whitemountainwheels.com
7thavehvl.com
developmethis.com
funkydogbowties.com
travelodgegrandjunction.com
gao-town.com
globalmarketsuite.com
blogshippo.com
hdbka.com
proboards67.com
outletonline-michaelkors.com
kalkis-research.com
thuthuatit.net
buckcash.com
hollistercanada.com
docterror.com
asadart.com
vmayke.org
erwincomputers.com
dirimart.org
okkii.com
loteriasdecehegin.com
mountanalog.com
healingtaobritain.com
ttxmonitor.com
nwordpress.com
11bolabonanza.com