Crypto Crash

Crypto Crash: The research primarily looked at why LUNA and UST saw an unprecedented meltdown in May

The overall crypto market saw a major dip in token prices in May. ( Image Source : Pixabay/Sergei Tokmakov )

In May, the overall cryptocurrency market saw an unprecedented meltdown as $40 billion got wiped out of investors’ holdings. Now, new research suggests that this was caused by the act of just seven ‘whale’ traders. For those unaware, institutions or investors who hold considerably large amounts of certain cryptocurrencies are referred to as ‘whales.’ The recent crypto crash was primarily caused by the ‘de-pegging’ of TerraUSD (UST) stablecoin, which in turn led to Terra (LUNA) losing almost of its value, as the two crypto coins were directly interlinked.

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The research, published by cryptocurrency analytics firm Nansen on May 27, primarily looked at why LUNA and UST saw such a massive plunge last month. It mainly looked to debunk theories that stated the crypto collapse was caused by a single entity. “We refute the popular narrative of one ‘attacker’ or ‘hacker’ working to destabilize UST,” Nansen stated in its report. “Our on-chain investigation revealed that a small number of players identified vulnerabilities early into the UST de-peg.”

Hard lessons from the crypto crash

UST is a stablecoin pegged 1:1 to the US dollar. As it lost its dollar value, also referred to as ‘de-pegging,’ the LUNA crypto, which was directly linked to UST, lost nearly all its value, trading at over 99 percent below its all-time peak of $118.

The research says that between May 7 and May 11, the whale accounts in question aggressively sold UST on crypto exchanges, as they 

appeared to have lost faith in UST’s capability of maintaining its dollar peg.

Here’s the list of the seven wallets “most likely to have played a significant role in the UST de-peg”, as per the research:

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0x8d47f08ebc5554504742f547eb721a43d4947d0a (EIP 1559 User)

0x4b5e60cb1cd6c5e67af5e6cf63229d1614bb781c (Celsius)

0x1df8ea15bb725e110118f031e8e71b91abaa2a06 (hs0327.eth)

0xeb5425e650b04e49e5e8b62fbf1c3f60df01f232 (Heavy Dex Trader)

0x41339d9825963515e5705df8d3b0ea98105ebb1c (Smart LP: 0x413)

0x68963dc7c28a36fcacb0b39ac2d807b0329b9c69 (Token Millionaire / Heavy Dex Trader)

0x9f705ff1da72ed334f0e80f90aae5644f5cd7784 (Token Millionaire)

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When the Luna Foundation Guard failed to stabilize the UST price, even more holders began to sell to cut losses, and hence, the price fell lower than ever.

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Terra creator Do Kwon suggested a Terra Revival Plan 2, which led to the formation of a new version of Terra, commonly referred to as LUNA 2.0 or Terra 2.0. The new coin made its debut on May 27, but so far, showed extremely volatile price movements since its launch.

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Bitcoin’s price rose above $30,000 over the weekend and continued to hold firm Tuesday. This is bitcoin’s first rally in weeks as the crypto and stock markets have largely struggled to regain upward momentum following a broader sell-off earlier in the month.

However, bitcoin could see its price challenged again if it doesn’t rise above $40,000, says Nicholas Cawley, a strategist at DailyFX, a research website that provides technical analysis on financial markets.

“While the Bitcoin background is marginally more positive, it should be remembered that this is from a depressed price level,” says Cawley. “The technical outlook is neutral at best and bitcoin really needs to trade back above $40,000 before any kind of bullish outlook can be confirmed

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