Nansen Said That the Celsius Network is Partly Responsible for Terra’s Meltdown

Written by C, Fiona

Last updated: 2022-05-30

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Nansen, a blockchain analysis company, said that many parties participated in the selling activities that led to TerraUSD falling into a “death spiral”.

Research firm Nansen confirmed that several entities participated in the recent deleveraging of TerraUSD, including the Delphi lender Celsius network. “We refute the popular saying that an ‘attacker’ or ‘hacker’ is committed to undermining the stability of UST,” the analysis company said in a research report yesterday.

Unlike other stable currencies supported by legal tender reserves, such as tether (USDT) and circle (USDC), USDTerra relies on its sister currency Luna to maintain its peg in an algorithmic manner. Investors bet on ust in anchor protocol (a cryptocurrency bank) and can get an annual return of 20%. Earlier this month, when the algorithm failed, the prices of ust and Luna collapsed, wiping more than $40billion from the cryptocurrency market and putting pressure on other cryptocurrencies.

Nansen Said the Evidence Points to “Well Funded Entities”

“The decoupling of ust may… Be caused by the investment decisions of several well funded entities, such as complying with the restrictions of risk management, or reducing the distribution of ust deposited in Anke in the case of macroeconomic and turbulent conditions,” Nansen said. Nansen added that such investment decisions may or may not be the result of malicious activities.
Some users took advantage of the arbitrage choice caused by the UST price difference of centralized exchanges such as the defi lending application curve and coinbase.

Luna Foundation Guard (LFG), a fund reserve designed to help ust maintain its linkage, withdrew USD 150million from curve finance. Several users deposited US $105million worth of UST. In response, LFG withdrew more funds. This repeated situation will continue until may8,2022. After that, several large holders began to extract ust from anchor protocol and convert it into Ethereum. Once on Ethereum, users begin to use curve finance to exchange ust for other stable currencies, and conduct multiple rounds of trading by taking advantage of the price differences between centralized exchanges, decentralized exchanges and curves.

Nansen said that one of the two wallets that extracted $420million from anchor was related to Celsius and participated in the use of wormhole bridge to convert the funds into Ethereum. Celsius is also related to the activities of another wallet, which also played a role in Terra’s decoupling event.

Celsius Remained Silent About the Findings

In addition to this tweet released on May 11, Celsius has refused to comment so far: “as part of our responsibility to serve the community, @celsius network implements and complies with a strong risk management framework to ensure the safety and security of assets on our platform. The funds of all users are secure. We continue to open our business as usual.”

Terra