Analysts reported Celsius Network’s involvement in Terra’s collapse

What’s new? Analytics firm Nansen has conducted an investigation, which resulted in a claim that the Celsius Network, a DeFi lending platform, was involved in the collapse of the Terra (LUNA) ecosystem. The experts stressed that the depegging of the TerraUSD (UST) stablecoin from the US dollar cannot be attributed to a single attacker, but rather to the actions of a small number of crypto market players. To do so, the experts analyzed blockchain data between May 7 and May 11. This is reported on the company’s website.

Nansen’s research

Details of the investigation. Analysts suggest that the loss of UST pegging may have been due to some organizations’ investment decisions made amid risk management requirements, or their desire to reduce the amount of UST placed in the lending Anchor Protocol, built on the Terra blockchain. The latter, according to experts, may have been caused by volatile macroeconomic and market conditions. Nansen noted that the trading activity was not necessarily dictated by the intention to destabilize the UST rate, but it eventually led to the depegging of the stablecoin from the dollar, which was followed by its collapse to almost zero.

Analysts noted that some of these entities made money on arbitrage rates from the difference in the price of UST in the Curve lending protocol, depending on the exchanges on which it was traded, both centralized and decentralized.

In this, the fluctuations in UST inflows and outflows on Curve intensified hours after Terra’s co-founder Do Kwon posted a tweet mocking user concerns.

A wallet, associated with the Luna Foundation Guard (LFG), a non-profit organization created to support Terra’s ecosystem, withdrew about 150 million UST from Curve. Four addresses, including one associated with the Celsius Network, contributed about 105 million UST to Curve. The LFG resisted the subsequent UST withdrawal, “and the back-and-forth continued into the morning of May 8,” Nansen writes. A group of large holders then began withdrawing UST from the Anchor Protocol and transferring those funds to Ethereum through the Wormhole bridge. According to the research, the withdrawal from Anchor began in mid-April 2022.

Analysts found that two wallet addresses “significantly impacted the UST de-peg,” and one of them was linked to the Celsius Network. About 420 million UST was withdrawn from the two wallets from Anchor in 15 transactions. According to Nansen, Celsius was also a “ close counterparty that has sent and received funds to and from” another wallet, whose actions also contributed to the UST dollar peg breach.

What events happened before? On May 20, Celsius (CEL) CEO Alex Mashinsky said that the “Sharks of Wall Street” were responsible for the collapse of the TerraUSD (UST) rate and the short-term loss of the Tether (USDT) peg to the US dollar. In his view, short traders are also responsible for the recent fall in the CEL rate. ]The head of Celsius explained that the Wall Street traders deliberately seek to profit from the collapse of the cryptocurrency market.

For a detailed timeline of the collapse of the Terra ecosystem, see GetBlock Magazine’s article.