Large Investors Exit While Retailers Continue to Buy During UST Crash – Report

A stable coin UST ran on the Terra blockchain ( now Terra Classic), was designed to maintain its dollar peg through both algorithms and trading incentives involving another token, Luna. The growth of Terra exploded among the mom-and-pop investors over the last two years, and they benefited with 20% of interest rates on their investments from quasi-bank, Anchor. 

The death spiral of UST and Luna falling down to Zero virtually shocked the crypto market. Many questions were raised on its viability too. Further, the crash also triggered a broader shock and billions of dollars vanished just in a few days.

Large Investors Exit Drove Outflows

The Researchers recently made the report for Jump Crypto, they pointed out on the large depositors of UST got out of the Anchor as early as May 7, whereas small depositors have increased their exposure between May 7 and May 9. The Jump reports that the outflows of large investors from Anchor stripped UST away from its peg. 

A firm Jump Crypto is heavily involved in the defunct Terra blockchain says that the exit of large investors from Terra-related positions has resulted in TerraUSD (UST) loss in its peg, at the same time small investors continued buying.

The report on Terra’s meltdown in early May that Jump crypto, the unit of Chicago-based Jump Trading published last week. The firm remained silent on Terra’s demise including Terra’s backer, Luna Foundation Guard. Which allocate its funds to compensate users of UST, or steps the firm took in a failed effort to restore the coin’s 1:1 peg with the dollar. 

Positions of Anchor Depositors

The firm Jump Crypto further acknowledged the findings in Nansen’s report that a blockchain analytics platform, that a handful of wallets including one associated with crypto lender Celcius were “critical” as the dollar peg slipped. 

Response to the UST’s first slip on its dollar peg taking place on May 6 caused the large depositors to fall down 15% of their UST position in Anchor. Whereas small depositors or wallets with less than $10,000 in Anchor as of May 6 increase their exposure. 

The report further includes: ” However, their total position size was an order-of-magnitude smaller than that of mid-sized and large depositors, and so this increased exposure was sufficient to counteract the outflows.”

Further on May 7, the wallet was made a mysterious reduction in UST position through a series of transactions of about $85 million. The move triggered a large disaster as a result. In response to the criticism made on social media, Citadel Securities and BlackRock Inc had clarified that they are not responsible for Terra’s collapse and they have nothing to do with it. 

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