Last weekend, as Terra’s UST stablecoin confirmed the primary warning indicators of instability, slipping from its greenback peg to $0.985, Luna Foundation Guard (LFG), the nonprofit liable for overseeing the well being of Terra’s ecosystem, voted to deploy $1.5 billion in Bitcoin and UST from reserves to repeg UST to the U.S. greenback.
The transfer was the execution of a code-red technique LFG had been planning for months: Since January, LFG had stockpiled over $3.5 billion in reserves of Bitcoin, Avalanche, LUNA, and UST, to deploy if UST ever slipped beneath $1. Per LFG, that loaned capital could be used to purchase up big quantities of UST, creating purchase stress that will push the stablecoin again as much as its meant value.
And but, hours after the mortgage, on Monday, UST began to plummet and saved plummeting. By Tuesday, as UST’s value hurtled to unheard-of lows, LFG’s reserves had been all however emptied. And but, no salvation got here for the stablecoin: By the top of the week, UST had crashed to $0.13, destroying Terra’s native token LUNA within the course of and wiping out $40 billion in worth.
The catastrophic failure of Terra’s backstop technique begs the query: What precisely occurred to that $3.5 billion? Where did it go?
According to blockchain analytics platform Elliptic, on Monday, hours after LFG’s announcement of the $1.5 billion mortgage, a Bitcoin deal with related to LFG despatched roughly $750 million value of Bitcoin to a brand new deal with. That night, an extra $930 million value of Bitcoin was despatched from a number of LFG-associated wallets to the identical new deal with. This whole, 52,189 Bitcoin, value over $1.6 billion, was then moved from the brand new deal with to a single account at Gemini.
The switch left 28,205 Bitcoin, value about $875 million on the time, in LFG’s reserves. Early Tuesday morning, the entire quantity was moved to an account at Binance.
Whether the Bitcoin in these Gemini and Binance accounts was bought off to purchase big quantities of UST is unknown, nonetheless. It’s not attainable to additional hint whether or not these large sums of Bitcoin had been bought, or moved any variety of different wallets nonetheless in LFG’s management.
In the wake of the disaster triggered by UST and LUNA’s collapse, many have begun to brazenly query the transparency of Terra and Terra co-founder Do Kwon’s actions within the final week.
MOST SHOCKING THING IS WE STILL DONT HAVE ANY STATEMENT FROM DO KWON OR TERRA TEAM ABOUT WHERE DID ALL THE BTC RESERVE GO, EVEN AFTER 4 DAYS OF $LUNA AND $UST CRASH
— Ash WSB (@ashwsbreal) May 15, 2022
As of writing, UST was buying and selling at $0.18, and is taken into account to be functionally nugatory. Bitcoin, nonetheless, has bounced again to a value above $30,000.
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