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A New Report Shows Large Investors Exited Terra Luna While Retail Purchased

Kanav Kariya Jump Crypto
Kanav KariyaPhotographer: Eva Marie Uzcategui/Bloomberg

Jump Crypto, the crypto arm of Chicago-based Jump Trading, published a report on Terra’s breakdown on Thursday, stating that some significant investors withdrew Terra-related holdings as the TerraUSD (UST) stablecoin began to lose its peg.

The company, highly associated with the collapsed Terra network, added that, on the other hand, small investors continued to buy during the collapse.

Until recently, the company has kept relatively silent regarding Terra’s fall, including how Terra’s backer, Luna Foundation Guard, will allocate its remaining assets to reimburse UST investors, and the actions it took as a failed attempt to restore the coin’s 1-to-1 peg to the dollar.

While Kanav Kariya, the president of Jump, is listed on the foundation’s website as a member of its governing council, the report does not mention his company’s involvement in the stablecoin saga.

However, the findings, which are based on publicly available blockchain transactions and exclude Jump’s internal data, show that some large investors sold their positions in UST far earlier than many smaller investors, demonstrating that cryptocurrency remains a game for big players.

The Collapse of Terra Luna

UST, a stablecoin that existed on the Terra blockchain (now Terra Classic), was maintained to protect its dollar peg using a combination of algorithms and trade incentives with another token, Luna.

Terra’s popularity soared in the last two years among both major and small investors, thanks to its quasi-bank, Anchor, which offered UST depositors 20 percent interest rates at some point.

However, a series of events produced a “death spiral” that dropped the prices of both UST and Luna to near-zero, startling the crypto industry and raising doubts about its future. It set off a chain reaction, and billions of dollars vanished in days.

The Jump Crypto Report

Jump Crypto acknowledged findings in a previous investigation by Nansen, a blockchain analytics platform, that a handful of wallets, including one linked to crypto lender Celsius, were “important” as the dollar peg slipped, resulting in the blockchain collapsing.

While some significant UST depositors moved out of Anchor as early as 7th May, according to the Jump Crypto report published by Nihar Shah and Maher Latif, minor depositors increased their exposure between 7th May and 9th May. According to Jump, UST outflows from Anchor played a crucial role in separating UST from its peg further.

When the dollar-peg slip first occurred on 6th May, big depositors were able to instantly chase down over 15% of their UST position in Anchor. In contrast, small investors, or wallets with less than 10k USD in Anchor as of 6th May, boosted their exposure.

“However, their total stake size was an order of magnitude smaller than that of semi and big depositors,” the report said, “and hence this additional exposure was inadequate to counteract the withdrawals.”

Jump believes it is unlikely that the wallet that sparked the crash was linked to a professional trading company based on the wallet’s history.

The unknown wallet lowered its UST position by around 85 million USD via a series of transactions on 7th May, which the crypto market believes was the beginning of a series of events that led to the wider catastrophe.

After many users on social media speculated about who was to blame for Terra’s demise, Citadel Securities and BlackRock Inc. insisted in May that they had nothing to do with it.