Do we know any factual details behind on the attack?

[Real1]

I think the broad consensus is that this was a well-orchestrated, and wildly profitable, attack on UST, made possible by the in retrospect boneheaded decision to back up UST by hyper-volatile BTC, which was practically begging for someone to take advantage of the fractional “reserve” of BTC that was supposed to prop-up UST - so it ended up doing the exact opposite, and ended up inadvertently causing this very event.

There’s all sorts of speculations floating around. Frankly, this forum is much more level-headed, well-informed and (mostly) hyperbole-free than most other venues, so I think this is a good place to ask.

What do we know so far, what made this massive depeg come on? And not just once but twice (or thrice, depending on how you look at it) big massive drops.

I think (speculate) that the first big drop down to 0.69 was the planned & coordinated attack (if there even was one, I think that is certainly plausible and likely). Then the next two drops down to 0.29 was the run-away train of fear and retail investors panic selling, making arbitrageurs and others boatloads of money. That’s when the whale was done, but a bunch of sharks went on to clean up the remains of the badly bleeding retail depositors/investors.

And what do we know about what is helping the peg recover now? LFG was supposed to be getting $1B+ of external funding to help to prop it up. Was that ever consummated and did that ever happen or no? (Though I guess if it did, and especially the volume of it, they’d want to keep quiet until this is well over.)

If the recovery now is simply all the nervous nellies done their selling, while the bunch of sharks who attacked the bleeding remains after the whale have finished their munching also, and the market starting to organically recover and find a longer-lasting equilibrium all on its own (which I think will, if not forever, then for a long time, have a certain risk premium built-in for UST, though I hope it’ll be in the 0.9x range), that’s actually a good and encouraging sign. On the other hand, if the recovery is propped up by external funds, that’s also certainly good for the moment, but we don’t know how long it’ll last, though there’s heavy vested interest for someone who’s committed $ Billions to this for it to work.

Anyhow, just looking for some more informed takes on this than mine, and especially for any factual (on chain or elsewhere) breadcrumbs, that may indicate what went on, and what is going on now.

[soother]

I don’t think this collapse has much to do with the reserves being held in BTC and not dollars. They shouldn’t have publicised how much reserves they had, sure, as this helped the attackers, the system was flawed fundamentally as it was clear to everyone it couldn’t resist a big enough bank run, the leaders’ arrogance probably didn’t help, someone wanted to teach them a lesson. But ultimately this was about money, the attack was very profitable and the target was known to be vulnerable.

I remember the first sign of trouble was $2.5bn outflows out of Anchor on Sat evening / Sun morning. This was maybe mostly money that Anchor borrowers (of UST) deposited back to Anchor. Trigger was maybe that people wanted to sell their collateral, a lot of them at same time → $2.5bn outflows of Anchor — there was only a 0.5% depeg then, but to me the outflows were very worrying, why risk it? rushed home and moved everything out of UST, maybe others thought the same, some bigger actors saw the time ripe for an attack, the rest is history.

Smart money knew the system was vulnerable, they just all waited for a trigger, the first signs of the avalanche. And then it started.

[bitn8]

The flipside is looking into this daunting task. Nevertheless, we may never know.

[paletas]

Did I expect another May event? Sure did, not necessarily in May. Did I expect this? Not at all.

BTC may have helped facilitate what transpired, but I don’t believe it’s the culprit, attack or not this whole system always relied on some faith, faith in the peg and the mechanisms that ensure it, and that faith was gone before it was even required. We can blame hedge funds, the btc reserves, or the big bad wolf, but going further we need UST growth to be more controlled.

At the start many claimed the peg was intact on chain, but no one cares, the broader community only cares that the peg was not intact on CEXs and other chains, if/when we get out from under this mess we need to make sure we can defend the peg outside of the main chain, and that the network works better when under massive usage, even if it means restricting the growth of dApps on chain and forcing them on other IBC enabled chains.

[Real1]

@paletas

even if it means restricting the growth of dApps on chain and forcing them on other IBC enabled chains.

Good point. For months I was quietly thinking that issues may be brought forth in Anchor by it going cross chain outside of the Cosmos IBC that it was built in (and I thought, then what was the point to build Terra on top of Tendermint, if not to focus and stay within the Cosmos IBC?). Personally, I was expecting there to be some real issues (not this scale, though) from the “wormhole” or what not gateways to other disconnected chains. I do think that is a real risk, Anchor going outside of IBC. (But, I only have cursory knowledge and not in-depth understanding of the whole inter-chain thing, so…)

[BTFD]

@Real1

What do we know so far, what made this massive depeg come on?

One word: Citadel.

It’s what these bastards have always done. They announced their intent two months ago. This is how they build a book. Orchestrate an attack, drop prices, and buy on the cheap, then sell it all back to their whale investors on the next pump.

When you trade at e-trade or TDA, guess who takes the other side and wins 90% of the time? Citadel.

When whales want a high interest sudden loan, guess who funds the note and charges 20% interest? Citadel.

They have been missing opportunities thanks to loss of trade revenue to crypto CEX/DEX’s and especially lending platforms like Anchor. This is payback. They just made a killing.

Kenny, the POS on the right is the guy behind it all. Here’s what he said in March:

“We have to give serious consideration to being a market maker in crypto,” Griffin remarked. “It’s fair to assume that over the months to come, you will see us engage in making markets in cryptocurrencies.”

Will the SEC or the DOJ go after him for this? Nope. Will they go after Kwon and other CeFi and DeFi teams? You bet.

Welcome to the best democracy money can buy.

[Real1]

@BTFD

One word: Citadel.

Is there anything to back this up, other than speculation?

Citadel is the favorite target of many, but I am not aware of any factual indications that they have all of a sudden gotten into crypto. That quick. And on this scale. Seems unlikely (not impossible).

Also, attacking a stablecoin is akin to attacking a national currency. Not a popular move. (Then again, not like it’s never been done. Anyone literate in economics knows how Soros took down the GBP and the Bank of England, while making $1.1B in 1992. That’s probably the best analogy to what has happened here to Terra/UST. Both what happened and the scale.)

[RAK]

You had to think that if there really was a risk, it could only get worse if people started selling? I saw the depeg and knew it was not good, but reasoned that selling would be the worst action as it would contribute to the problem.

I realize we’re told to act in self-interest, but why pool capital with others to create value, only to bail the moment uncertainty appears? I’m watching the world dying around me, the economy collapsing, and its met with self-interest. No one can escape everything failing, it’s just not rational and Terra just confirmed that for me.

[MQzPcUs2BXxIhw]

So you are a communist. That’s fine, but I was born in a communist country and will never subscribe to that system, it was horrible.

[BTFD]

Your good heart cost you. Markets are full of greedy bastards. You have to arm yourself before entering a gladiator arena. Sucks that it’s that way. But it definitely is.

Ust almost gone at Kraken:

Luna dead.

[Outtacryxever]

No doubt it was, and no doubt we will never know as well. This is why crypto is not getting the mass adoption it is meant to, shady crooks everywhere, no transparency, zero regard for users…I do not need to follow, do I? Arb bots activity was insane before first depeg, TFL response was criminally negligent at best. Why didn´t luna moonshot to dry up the supposed ust excess? That never happened and it should have, not to mention the fact that the collaterallized token should be luna, never ust. Luna controls and backstops (and you cannot have such volatile collateral as btc) At a 110% collateral, stop minting, at 130% resume. If volatility in the USD climbs, you stop minting and issue a volatility alert, etc, etc.

Another shameful, pityful hitjob in the sorrowful history of crypto, not ruling out Citadel, TFL itself and even Binance, who has benefitted enormously from the Cosmos network and not given back a dime, ever and it is now the embodyment of everything crypto is NOT supposed to be. We will never know for sure, bet on it. To me, it clearly stinks of coordinated massive arb bots attack after depeg, and it should be easy to know what bots and who owns them. By the way, no exchange halted ust trading on their own when depeg was outta control…no way that is accidental.

As for ANC, Do you fell like turning to BUSD (runs on Cosmos) FIX THE TWO CRITICAL ISSUES REPORTED BY ANC ITSELF IN ITS TWITTER FEED (You know what I´m talking about, you were rude enough to not even reply to the good people that reported them in good faith) and bring back yields to sustainable levels.