A cryptocurrency crash that wiped out $40 billion from investors’ holdings was caused by just seven traders, according to new research.
Crypto analytics firm Nansen released a detailed report on the sinking of Terra’s LUNA and UST tokens earlier this month, debunking the narrative of some industry insiders that the collapse was caused by a single entity.
“We refute the popular narrative of an ‘attacker’ or ‘hacker’ working to destabilize UST,” the report states.
“Our on-chain investigation found that a small number of players identified vulnerabilities early in UST decoupling [to the US dollar].”
Between May 7th and 11th, these so-called “whales” appeared to lose confidence in UST’s ability to remain pegged to the dollar, leading to aggressive selling of the token on crypto exchanges.
After failed attempts by the Luna Foundation Guard – a non-profit cryptocurrency watchdog and protection body – to stabilize the price of UST, more holders decided to cut their losses and sell, resulting in the price eventually falling below 0, $10 crashed.
The cryptocurrency’s demise helped its sister coin LUNA fall in value by more than 99 percent, falling from nearly $120 at its peak to just a ten-thousandth of a cent.
The crash contributed to a market-wide downturn that saw Bitcoin (BTC), Ethereum (ETH) and other leading cryptocurrencies fall to 18-month price lows.
Terra has since launched a new version of LUNA dubbed Terra 2.0, which it hopes can compensate investors in some way by airdropping them free tokens.
After launching on major crypto exchanges over the weekend, the revived token also saw its price plummet, dropping from nearly $20 to below $5 in a matter of hours.
Some of the original LUNA investors shared stories online of how they sold their new holdings of Terra 2.0 immediately upon receipt.
“Sold my available LUNA 2.0 Airdrop”, one wrote on Twitter.
“I don’t see anything fundamental here and I see everything I get as a bonus as I’ve already written everything off as a loss.”