Terra Whales Dumped Onto Retail During Crash, Report Shows

Several large Terra holders exited their positions, while retail holders kept accumulating early into the crash, a report shows.

Jump Capital- a major investor in Terra- said in a report that some of the blockchain’s largest holders had liquidated their holdings just as the UST stablecoin began to depeg in early-May.

In contrast, smaller wallets continued to accumulate. Jump noted that a series of large withdrawals and swaps in a UST liquidity pool had kicked off the depegging.

A bulk of outflows were also centered around Terra’s Anchor Protocol, which saw a flurry of withdrawals when UST just began depegging. Jump cited on-chain data in the report.

Anchor Protocol played a major role in Terra crash

Jump cited a recent report by on-chain analytics firm Nansen, which identified seven main wallets that drove outflows from Anchor. But these seven were part of a much broader trend.

Wallets with over $1 million in Anchor deposits, which Jump describes as “large” depositors, cut over 40% of their holdings on the platform during the initial depegging.

Small depositors- with wallets holding less than $10,000 on Anchor, in contrast, increased their holdings on the platform in this period. But given that they made a fraction of overall liquidity, this demand did little to support LUNA and UST prices.

Anchor Protocol was essentially ground zero for the Terra crash, given that 70% of UST liquidity was locked into the platform. The platform’s imbalance between depositors and borrowers also contributed to its eventual downfall.

Crypto sentiment also played a major role

Outflows from Terra were exacerbated by poor crypto market sentiment. The depegging came in the wake of a crash in the market, triggered by a Federal Reserve rate hike. Strong U.S. inflation numbers also contributed to this tumble.

Terra’s crash wiped out over $30 billion of investors funds in a matter of days. It has attracted regulatory ire from across  the globe, and is expected to prompt stricter laws on crypto.

While Terra has since launched a new blockchain to help restore some value, the project appears to have lost most of its goodwill with the market.

With more than five years of experience covering global financial markets, Ambar intends to leverage this knowledge towards the rapidly expanding world of crypto and DeFi. His interest lies chiefly in finding how geopolitical developments can impact crypto markets, and what that could mean for your bitcoin holdings. When he isn’t trawling through the web for the latest breaking news, you can find him playing videogames or watching Seinfeld reruns.
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