Crypto analytics firm Nansen compiled an on-chain analysis of the events leading up to the crash of UST.
Algorithmic stablecoins may be dead or may emerge in a different way.
But UST is definitely not coming back, and speculation has abounded as to who caused its crash in the first place. While Twitter was rife with rumors about a possible coordinated attack following the immediate aftermath of the crash, an on-chain analysis by analytics firm Nansen now provides answers.
The firm identified a "small number of players" that took advantage of vulnerabilities early into the de-peg and accelerated the death spiral. Specifically, Nansen points out the following key dynamics leading to UST's demise:
- UST funds were withdrawn from Anchor.
- These funds were then bridged to Ethereum via Wormhole.
- The wallets swapped the UST for other stables on Curve.
- After liquidity on Curve got drained, inefficiencies and arbitrage opportunities arose between decentralized and centralized exchanges, which did the rest for UST.
Nansen refutes the take that a single entity destabilized and collapsed UST. Instead, it comes to the following conclusion:
"The de-peg of UST could instead have resulted from the investment decisions of several well-funded entities, e.g. to abide by risk management constraints or alternatively to reduce UST allocations deposited into Anchor in the context of turbulent macroeconomic and market conditions."
In particular, Nansen identified seven wallets that significantly influenced the UST de-peg. One of them belongs to Celsius, a centralized crypto staking provider:
Source: Nansen.ai
According to Nansen, these seven wallets kicked off the death spiral with their withdrawal from Anchor on May 7. The report does not dive into whether the wallets could have or maybe did coordinate their actions.
Celsius has recently come under fire for having possible bad debt on its books. Reportedly, Wall Street shorted the company, with the CEL token cratering 80% from its valuation in April.
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