The Attacker of UST Stablecoin Made Rich Profits, Here’s How

Because the starting of the week, Terra’s UST stablecoin has seen a significant crash de-pegging from the USD. On the identical time, Terra’s native cryptocurrency LUNA has corrected by over 80% within the final 4 days.

Amid all of the massacre, speculations have been rising that there was a coordinated assault on the UST stablecoin. The preliminary report suggests {that a} single attacker offered $285 million UST stablecoins on Curve and Binance.

Nevertheless, the attacker may have made greater than $800 million from this coordinated assault. A well-liked on-chain analyst that goes by the identify Onchain Wizard on Twitter has printed a current thread explaining the potential for how the attacker may have exploited the LUNA-UST-BTC ecosystem.

Again in March, the Luna Basis Guard (LFG), Terra’s mum or dad agency, introduced that they are going to be shopping for $10 billion value of Bitcoin reserves to safeguard the soundness of its UST stablecoin. This was when the attacker acquired lively says Onchain Wizard. Additionally, the 4pool Frax announcement for UST, helped the attacker to execute the technique. Making a wise guess, he additional explains:

“We don’t know when the attacker borrowed 100k BTC to begin the place, aside from that it was offered into Kwon’s shopping for (nonetheless hypothesis). LFG purchased 15k BTC between March twenty seventh and April eleventh, so lets simply take the typical value between these dates ($42k)”.

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In consequence, the attacker had constructed $4.2 billion in Bitcoin quick positions by April 11. Concurrently, the attacker additionally builds $1 billion in over-the-counter (OTC) place in UST. Now, this units the stage to liquidate the UST and concurrently quick the Bitcoin, understanding the truth that LFG will promote its Bitcoins to guard the UST peg.

The Actual Sport of UST Assault Begins

LFG initially removes $150 million in liquidity in anticipation of 4pool. The liquidity pull occurs on Could 8. On the identical time, the attacker makes use of $350 million of UST to empty the Curve liquidity. This begins de-pegging the UST pushing it all the way down to $0.97.

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Later, the Luna Basis Guard (LFG) additionally begins promoting its Bitcoin from reserves to guard the peg. This places downward strain on Bitcoin. Now with the Curve liquidity drained, the attacker begins offloading the rest of $650 million from the $1 billion OTC UST place, on Binance. Onchain Wizard explains:

“So LFG is promoting $BTC to revive the peg whereas the attacker is promoting $UST on Binance. Finally, the chain will get congested and the CEXs droop withdrawals of $UST, fueling the financial institution run panic. $UST de-pegs to 60c on the backside, whereas $BTC bleeds out”.

Now with robust UST liquidations, LUNA value begins to break down due to Terra’s algorithmic mechanism. Over the past month, the Bitcoin value has dropped from $42K to now at $32K.

Now if the attacker might need lined his/her 100K BTC quick positions at $32K, they might have remodeled $950 million. In fact, the attacker would have made some losses on the UST dump, nevertheless, that might be very minor. Onchain Wizard explains:

“On the $350mm of $UST curve dumps I don’t suppose they took a lot of a loss, lets assume 3% or simply $11m. And lets assume that every one the Binance dumps had been carried out at 80c, thats one other $125mm value of doing enterprise. For a grand whole revenue of $815mm (bf borrow value)”.

The analyst additional explains that any quick on LUNA would have made the attacker further earnings. As soon as once more our main shoutout to Onchain Wizard for this insightful thread.

Bhushan is a FinTech fanatic and holds an excellent aptitude in understanding monetary markets. His curiosity in economics and finance draw his consideration in direction of the brand new rising Blockchain Expertise and Cryptocurrency markets. He’s repeatedly in a studying course of and retains himself motivated by sharing his acquired data. In free time he reads thriller fictions novels and typically discover his culinary expertise.


The offered content material might embrace the private opinion of the writer and is topic to market situation. Do your market analysis earlier than investing in cryptocurrencies. The writer or the publication doesn’t maintain any duty on your private monetary loss.

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