Jump Crypto has spoken out today on Terra’s collapse after a significant time despite being one of the primary supporters of the Terra project. Jump Crypto is a cryptocurrency-focused subsidiary of Chicago-based decade-old proprietary trading firm Jump Trading. The company took to Twitter to share its view on cryptocurrency fall in multiple tweets.
What was the key reason behind Terra’s collapse as according to Jump Crypto?
It has been said that the primary reason behind the failure of Terra was mostly caused by a mix of trades in the USTw-3CRV Curve pool.
2/ First, the episode was triggered by a combination of trades in the UST/3CRV pool during a seventy-five minute window on Saturday, May 7.
— jump_crypto (@jump_) June 3, 2022
Actually, USTw-3CRV Curve pool was supposed to have a balance in 50-50% ratio for UST as well as for 3CRV. However, the pool’s balance and depth were lost after TerraForm Labs (TFL) removed UST liquidity and two wallets put large UST sale orders.
5/ Large depositors disproportionately drove the outflows. In fact, small depositors increased their exposure during this episode. pic.twitter.com/xTPXp9b7YW
— jump_crypto (@jump_) June 3, 2022
Large depositors were mostly responsible for these outflows. Large depositors reduced their UST investment by 15% shortly after the stablecoin began losing its peg.
Small depositors, in particular, increased their risk throughout the incident. This suggests that following the huge catastrophe, individual investors were left carrying the bag. Since regular investors’ total stake was lower than that of crypto whales, they were unable to make a difference.
Terra, a Ponzi scam
As per information, the peg was also under considerable strain as a result of huge outflows from the Anchor protocol. Even before Terra’s fall, Anchor Protocol, which enticed investors with too-good-to-be-true 20% interest rates, was accused of being a Ponzi scam.
4/ Second, outflows from Anchor — particularly overnight on May 7 and on the morning and early afternoon of May 9 — put substantial pressure on the UST peg. pic.twitter.com/JYBlu35X01
— jump_crypto (@jump_) June 3, 2022
Following Terra’s fairly predicted collapse, it appeared that the protocol was actually a fraud.
Different views in crypto industry on Terra collapse
Pro-crypto Pennsylvania Senator Pat Toomey believes that Terra was a fraudulent enterprise since it promised high profits with doubtful technology. However, Sam Bankman Fried (SBF) who is co-founder and CEO of crypto exchange FTX feels that TerraUSD’s fall was due to overexcitement rather than manipulation.
Billionaire Bill Ackman thinks that pyramid schemes like Terra endanger the whole cryptocurrency sector. However, Kevin O’Leary, a Canadian businessman, banker, and television personality believes that Terra’s collapse is not a setback for the stablecoin industry but it reveals that the sector now needs legal clarification.
