Nansen’s UST stable coin depeg study has two main findings.

Following the collapse of Terra’s UST algorithmic stablecoin, blockchain analysis firm Nansen has identified two important conclusions.

As the dust settles on the Terra ecosystem’s dramatic collapse, Nansen’s on-chain deep-dive blockchain analytics firm reveals two important conclusions.
Various speculative explanations abound in the cryptocurrency world as to why Terra’s algorithmic stable coin UST decoupled from its $1 peg. The who and why remained a mystery, but the consequence was disastrous, with the value of UST sliding well below $1 and the value of Terra’s stablecoin token collapsing as a result.

Nansen conducted an analysis using on-chain data from the Terra ecosystem and the Ethereum blockchain to trace the events that led to the UST depreciation.

The analysis excludes potential off-chain activities that may have exacerbated the problem, the impact on investors, the breakdown of net losses amongst wallets, and what happened to the Bitcoin (BTC) reserves supporting UST.

To exploit arbitrage possibilities, attackers preyed on thin Curve liquidity.

Nansen’s finding of a limited collection of addresses or players that highlighted weaknesses in the Terra ecosystem was the first and most important lesson. These players took use of the TerraUSD (UST) peg to other stablecoins’ comparatively low liquidity and moved to take advantage of arbitrage possibilities.

The paper explains how these individuals took UST monies from Terra’s Anchor mechanism. Using the Wormhole technology, this money were subsequently transferred from Terra to Ethereum.

Curve’s liquidity pools then traded massive quantities of UST for numerous stablecoins. Nansen then suggested that throughout the depegging process, some of the discovered wallets took advantage of pricing disparities on Curve, as well as decentralized and centralized platforms, by purchasing and selling holdings on several exchanges.

Nansen’s findings debunked the theory that UST was destabilized by a single hacker or attacker.

Seven wallets are crucial to UST’s depreciation.

Nansen used a grounded theory technique to identify key transaction volume data between May 7 and 11 – the interval when UST lost its $1 peg.
To narrow down that time span, the business looked at social media and forum posts, identifying major transaction volume on Curve liquidity pools, which led to its three-phase analytical technique.

The first phase involves analyzing transactions in and out of the Curve lending protocol, which allowed Nansen to construct a list of wallets whose behaviors indicate a major influence on the UST depegging.

The second phase was a little more problematic because Nansen saw transactions through the Wormhole bridge that may have affected the depeg event. The business looked at UST outflows from the Anchor protocol involving a select group of wallets. Following that, the selling of UST and USDC on controlled exchanges was investigated.

Triangulating on-chain facts to build a narrative of events surrounding the UST depeg was the final process. Following that, a list of seven wallets was highlighted, all of which are thought to have had a role in the Terra ecosystem’s demise.

The Nansen paper has some fascinating findings based on blockchain analytics. The business chose not to comment on the likely intentions or reasons behind the seven significant addresses that played a big part in triggering the depeg of the UST algorithmic stablecoin, thus the basic ‘why’ remains a mystery.