The desolation of $LUNA and $UST.
Here's how market manipulation destroyed lives and wiped out years of savings.
📜🔍👀
Here's how market manipulation destroyed lives and wiped out years of savings.
📜🔍👀
1/
On 26 November 2021, @FreddieRaynolds wrote a step by step guide on how someone could destroy the @terra_money ecosystem with $1 billion spread across a few days.
On 26 November 2021, @FreddieRaynolds wrote a step by step guide on how someone could destroy the @terra_money ecosystem with $1 billion spread across a few days.
https://twitter.com/FreddieRaynolds/status/1463960623402913797
2/
@stablekwon addressed this, stating that it would be not only impossible but fundamentally more expensive than just shorting.
@stablekwon addressed this, stating that it would be not only impossible but fundamentally more expensive than just shorting.
https://twitter.com/stablekwon/status/1464943691143921664
3/
A summary of the past 3 days.
9 May
.: $UST started to de-peg slightly at $0.98.
10 May
.: A massive bank run which led to $UST dropping to $0.60
11 May
.: Amidst the chaos, the attacker(s) were still unloading their position, causing $UST to reach ATL at $0.22.
📉
A summary of the past 3 days.
9 May
.: $UST started to de-peg slightly at $0.98.
10 May
.: A massive bank run which led to $UST dropping to $0.60
11 May
.: Amidst the chaos, the attacker(s) were still unloading their position, causing $UST to reach ATL at $0.22.
📉
4/
Preparation.
1. The attackers allegedly borrowed 100,000 $BTC from @Gemini
2. They manage to accumulate $1 billion of $UST from @terra_money via an #OTC deal led by @GenesisTrading
3. Waited for the right time to attack
Preparation.
1. The attackers allegedly borrowed 100,000 $BTC from @Gemini
2. They manage to accumulate $1 billion of $UST from @terra_money via an #OTC deal led by @GenesisTrading
3. Waited for the right time to attack
https://twitter.com/napgener/status/1523770359828578304
5/
Start of the collapse.
While @LFG_Reserve was still accumulating $BTC, @terra_money started to move $150 million of $UST out of the 3pool in preparation for the launch of their 4pool.
This was the golden opportunity to strike.
Start of the collapse.
While @LFG_Reserve was still accumulating $BTC, @terra_money started to move $150 million of $UST out of the 3pool in preparation for the launch of their 4pool.
This was the golden opportunity to strike.
https://twitter.com/stablekwon/status/1523315720012001282
6/
The attack.
While $UST was pulled from @CurveFinance, $BTC was coincidentally trending downwards. 👀
This caused $UST to de-peg slightly, alarming a few people.
@LFG_org proceeded to sell some $BTC to re-peg $UST.
The attack.
While $UST was pulled from @CurveFinance, $BTC was coincidentally trending downwards. 👀
This caused $UST to de-peg slightly, alarming a few people.
@LFG_org proceeded to sell some $BTC to re-peg $UST.
7/
Aware of this, the attackers started to dump $BTC and $UST, all while shorting $BTC, $UST and possibly $LUNA.
On the other hand, @LFG_org was selling $BTC to protect the peg of $UST.
Aware of this, the attackers started to dump $BTC and $UST, all while shorting $BTC, $UST and possibly $LUNA.
On the other hand, @LFG_org was selling $BTC to protect the peg of $UST.
8/
This led to the death spiral.
1. Attackers dump $BTC and $UST
2. @LFG_org dumps $BTC
3. $BTC sell pressure ⬆
4. $BTC price ⬇
5. Panic ⬆
6. $UST sell pressure ⬆
7. $UST price ⬇
8. Repeat
🌀
This led to the death spiral.
1. Attackers dump $BTC and $UST
2. @LFG_org dumps $BTC
3. $BTC sell pressure ⬆
4. $BTC price ⬇
5. Panic ⬆
6. $UST sell pressure ⬆
7. $UST price ⬇
8. Repeat
🌀
9/
Since $ANC holds a large amount of $LUNA, the attacker knew this would trigger a massive sell-off due to $UST withdrawals on @anchor_protocol exceeding repayment rates.
This would further break the peg and destroy both $LUNA and $UST.
Since $ANC holds a large amount of $LUNA, the attacker knew this would trigger a massive sell-off due to $UST withdrawals on @anchor_protocol exceeding repayment rates.
This would further break the peg and destroy both $LUNA and $UST.
10/
Once the dump was complete, the attackers were able to buy back $BTC at a huge discount to repay their loans.
This allowed them to pocket the difference while printing separate bags of profit from their short positions.
Once the dump was complete, the attackers were able to buy back $BTC at a huge discount to repay their loans.
This allowed them to pocket the difference while printing separate bags of profit from their short positions.
11/
There are rumors going around that this desolation was caused by market manipulation.
Although they have denied all claims, the potential bad actors called out were @BlackRock, @Citadel and @GenesisTrading.
There are rumors going around that this desolation was caused by market manipulation.
Although they have denied all claims, the potential bad actors called out were @BlackRock, @Citadel and @GenesisTrading.
12/
Could this have been avoided?
Maybe,
If the 3pool liquidity migration was executed privately and only announced after the launch of 4pool?
or
If the $BTC deal was structured in a different way that did not involve $UST?
Who knows.
Could this have been avoided?
Maybe,
If the 3pool liquidity migration was executed privately and only announced after the launch of 4pool?
or
If the $BTC deal was structured in a different way that did not involve $UST?
Who knows.
13/
There are many lessons that we can take away from this.
.: Nothing is infallible
.: Never go all in
.: Diversify
.: Health > Wealth
.: Stay away from leverage
.: Remember to take profits
.: Always have an exit plan
But most importantly, to the attackers. 👇🏻
There are many lessons that we can take away from this.
.: Nothing is infallible
.: Never go all in
.: Diversify
.: Health > Wealth
.: Stay away from leverage
.: Remember to take profits
.: Always have an exit plan
But most importantly, to the attackers. 👇🏻
14/
I hope know what you did was unethical and detrimental.
Lives were lost, families destroyed and life savings wiped out within hours.
While most of the accusations were based on speculations, the financial and mental aftermath caused was real.
Let that sink in.
I hope know what you did was unethical and detrimental.
Lives were lost, families destroyed and life savings wiped out within hours.
While most of the accusations were based on speculations, the financial and mental aftermath caused was real.
Let that sink in.
15/
@terra_money has proposed to burn any remaining $UST in the community pool and all cross chain liquidity incentives, while increasing their minting capacity.
The result could help $UST to re-peg but at the cost of the destroying $LUNA.
@terra_money has proposed to burn any remaining $UST in the community pool and all cross chain liquidity incentives, while increasing their minting capacity.
The result could help $UST to re-peg but at the cost of the destroying $LUNA.
https://twitter.com/terra_money/status/1524665456476712961
16/
It will take time to rebuild.
Confidence and trust will be regained over time once people realize how vibrant the @terra_money ecosystem is.
With a dedicated and driven community of #LUNAtics, @terra_money will return stronger and better.
It will take time to rebuild.
Confidence and trust will be regained over time once people realize how vibrant the @terra_money ecosystem is.
With a dedicated and driven community of #LUNAtics, @terra_money will return stronger and better.
17/
Here are some other great threads covering the $UST death spiral.
Do let me know if I missed any!
👇🏻
Here are some other great threads covering the $UST death spiral.
Do let me know if I missed any!
👇🏻
18/
@4484 covers how the attack was coordinated and executed.
@4484 covers how the attack was coordinated and executed.
https://twitter.com/4484/status/1524006086147252227
19/
@jonwu_ tells us everything we need to know about the $UST de-peg.
@jonwu_ tells us everything we need to know about the $UST de-peg.
https://twitter.com/jonwu_/status/1523793482850050048
20/
@OnChainWizard explains how the attacker profited over $800 million from the destruction.
@OnChainWizard explains how the attacker profited over $800 million from the destruction.
https://twitter.com/OnChainWizard/status/1524123935570382851?s=20&t=PGqntUdr9NvANhlnNmD7Lw
21/
@ThyBorg_ summarizes the entire @terra_money assault.
@ThyBorg_ summarizes the entire @terra_money assault.
https://twitter.com/ThyBorg_/status/1524211415904448513
22/
@CryptoHarry_ reveals how BlackRock and Citadel could be the culprits behind the colossal mess.
@CryptoHarry_ reveals how BlackRock and Citadel could be the culprits behind the colossal mess.
https://twitter.com/CryptoHarry_/status/1524403730699137025
23/
@0xAndrewRyan recounts the collapse of @terra_money.
@0xAndrewRyan recounts the collapse of @terra_money.
https://twitter.com/0xAndrewRyan/status/1523948666981011456
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