Cryptocurrency community members are taking an increasing interest in the UST collapse incident. At the outset, the algorithmic stablecoin prices crashed following its peg to the USD was broken. However, new facts have surfaced after postmortem research on the matter. Crypto market analysts at Arcane Research recently published a detailed report on the UST crash.
The report suggests that while the LUNA and UST investors were struggling to stay afloat during the massive devaluation of the tokens within hours. The captain of the ship and the big investors has already fled the location in their emergency boats. It is worth noting that Michael Saylor, the CEO of MicroStrategy, recently claimed that prices in the cryptocurrency markets are dictated by whale investors.
Pump and Dump Scheme
More shocking facts to come out of the Arcane Research report have compared the Terra Classic crash with a classic pump and dump scheme. The report claims that the early supply of the LUNA tokens was hogged by a select few investors in addition to the bigwigs at Terraform Labs.
The report further suggests that between 2020 and 2022, Terra wallets recorded an outflow of 6 billion LUNA tokens over different exchange and other transaction options. Additionally, the remaining millions of wallets got a net inflow of $6.5 billion LUNA tokens that points towards a mass sell-off by the whale investors and big players in the Terra Classic chain.
The researchers at Arcane further explained that the UST liquidity pool following the crash presented the perfect exit strategy that occurs in most pump and dump schemes. On the other hand, the analysts also suggested that the simplified burn/mint mechanism of the Terra Classic chain allowed the investors to burn 1 UST for 1 LUNA and reverse without any restrictions.
The researchers also suggest that anyone who owns a considerable amount of LUNA can drive up the price of the tokens by buying their tokens and proceed to mint UST to decrease LUNA prices and reduce LUNA supply with the mint/burn option.
The report concluded that the early LUNA holders had a large liquidity bag at their disposal, and they used the UST exit gates to make profits as collateral of the failing bootstrapping efforts.