Did Celsius set off the domino effect? About a month ago, The Block Crypto reported that Celsius pulled at least $500M from Anchor Protocol before the collapse. Two weeks ago, blockchain analytics firm Nansen identified Celsius as one of the seven large wallets that allegedly triggered the bank run on Anchor. Recently, Celsius responded.
Is this the explanation for the Terra/Luna collapse? Wasn’t this whole situation a deliberate attack? Were natural market forces responsible instead? It is estimated that 75% of all USTs in existence were locked in Anchor Protocol, a service that offered a suspiciously high 19.5% yield. This number was one of the main drivers behind the success of UST and LUNA. It is logical that the bleeding began there.
How did all this happen according to this theory? Let us find out the facts and explanations provided by all the parties involved.
Nansen identifies Celsius
When the Terra/Luna crash happened, the first and main theory was a deliberate attack on an alleged vulnerability. According to NansenOn-chain forensics: the revelation of the TeraUSD D-PEG“Report,” this on-chain study refutes the narrative of an “attacker” or “hacker” working to destabilize UST. Then how did it happen? Well, natural market forces exposed poorly designed algorithmic stablecoins. Back to Nansen:
“Our analysis leveraged on-chain data to map out what happened before and during the UST d-peg. Through examining on-chain activities, we found that behind these wallets a small number of wallets and A potentially small number of entities created imbalances in the curve liquidity protocols that were regulating the parity between UST and other stablecoins.
One of those purses was of Celsius. Did they know a collapse was coming? Or did they react to a dangerous situation before?
UST price chart on Coinbase | Source: UST/USD on TradingView.com
Celsius’ explanation puts things in perspective
The fall of Terra/Luna began on 9 May. Two days later, Celsius tweeted this cryptic message: “As part of our responsibility to serve our community, Celsius Network implemented a robust risk management framework to ensure the safety and security of assets on our platform And they followed. All user funds are safe. We are open for business as usual.”
As part of our responsibility to serve our community, @ Celsius Network Implemented and abided by a robust risk management framework to ensure the safety and security of the assets on our platform.
All user funds are safe. We are open for business as always.
— Celsius (@CelsiusNetwork) 11 May 2022
What does Celsius mean? Circumstances forced him to explain himself. in the article “The search continues for the source of the TeraUSD crypto bank runThe Wall Street Journal explained to him:
“Celsius said that its risk-management group recognized the platform’s “stability change,” which prompted it to liquidate its assets only to protect its clients’ money. The company did not profit from volatility, Said it.
It also affirmed that one of Celsius’ business models was to accept deposits only from its clients, lock the funds in Anchor at a 19.5% yield, offer its clients a 14% yield, and pocket the difference. However, “it was not clear to the investors that their money in the Celsius account would have been invested in the Anchor platform. Celsius, Voyager and others in the industry generally do not disclose their counterparts.”
Where does the money come from?
The Wall Street Journal article went deeper than the fall of Terra/Luna. It points to a magnifying glass on DeFi in general.
“In DeFi, it is not easy to understand who provides the money for loans, where the money flows or how easy it is to trigger a currency recession. This is one reason why regulators are concerned about DeFi’s impact on investors and the wider financial system. worried about.”
look at that as an example of Block crypto explained How Celsius Invested His Money in the Anchor Platform. Obviously, doing all this instead of buying UST outright saved the company, but it’s still ridiculous:
“The process of depositing funds into the Anchor Protocol was complicated. This involved first staking ETH using Lido to obtain staking ETH (stETH); then stETH to the Anchor Vault on Ethereum to mint Sending and sending bETH (a token representation of stETH) to a crypto bridge wormhole; casting BETH on Terra using the wormhole; before finally depositing BETH into the Anchor protocol.”
We gave Celsius the right to respond. It is only appropriate that we end this with a critique of the service by Corey Klipston, the CEO of Swan Bitcoin, telling the WSJ:
“It’s being marketed as a better savings account and it’s not. What you’re really doing is you’re an unsecured lender. They’re collecting retail loans and backing it up into lightly regulated activities.” Investing from.”
Remember, these are all principles. Do what you want with all the information in this article. Also, do your own research.
Featured Image de Bradyn Trollip en Unsplash | Charts by TradingView