😳 Trader May Have Lost $9M in Exit from USDT
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Data Indicates Bots Made Off With Huge Sum on Arbitrum
By Samuel Haig
NEWS Opportunistic bots may have made off with millions of dollars worth of profits after one trader hastily tried to exit an enormous USDT position.
ARBITRUM On May 12, Twitter user gzeon flagged that one USDT holder on the Arbitrum network appeared to have incurred a $9.4M loss after hastily trying to convert $15.5M USDT for USDC via Curve’s deployment on the Arbitrum blockchain. Curve is a decentralized exchange designed to facilitate efficient stablecoin trading.
BOTS Transaction data from Arbiscan shows that the user sold 15.5M USDT and received just 6.14M USDC in exchange. Analyzing the data, Gzeon estimates that MEV bots made off with $3M from the transaction. Curve didn’t immediately respond to a request for comment.
VALIDATORS MEV refers to Maximal Extractable Value, which describes the practice of miners or other network validators manipulating the order of transactions in a network’s blockchain to extract profits.
By Samuel Haig
HALTED Terra has restarted as of 8:45am ET after halting for a second time. On-chain swaps have been disabled and users are asked to bridge non-Terra assets like bETH back to their native chains.
VALIDATORS “Terra blockchain has officially halted at the block height of 7607789,” Terra Daily tweeted. “Team validators have temporarily paused the network to come up with a plan for reconstituting it.”
SUSPENDED Meanwhile, the collapse of Terra’s ecosystem has prompted several leading centralized exchanges to delist LUNA and UST pairs, including Binance, Bybit, and BitMEX. Binance has also suspended all deposits and withdrawals for the Terra network.
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By Owen Fernau
POOL UST’s collapse continues to reverberate around crypto markets. Curve’s largest pool is out of whack — the stETH pool, which pairs ETH with stETH, a staking derivative of ETH, shows stETH trading at a 2% discount to ETH.
IMBALANCE The imbalance may indicate that investors are dumping illiquid assets, such as a derivative of ETH locked in Ethereum’s proof-of-stake chain, and rushing to cash.
UNLOCKS stETH is a token issued by Lido Finance. Users stake their ETH via Lido in exchange for stETH, on a one-to-one basis. Later when Lido unlocks the ETH after withdrawals from Ethereum’s Beacon Chain are live, users should be able to redeem their stETH for their ETH, plus the accrued staking rewards.
NEWS As Terra’s UST stablecoin continues to unravel, Tether, the crypto market’s largest stablecoin is also showing signs of stress. Stablecoin Tether (USDT) briefly lost its $1 USD peg in early morning trading and dropped to as low as $0.95 at 3:24 AM New York time before returning to $1, according to CoinGecko.
REFERENCE ASSET As a stablecoin, USDT is meant to be pegged to the price of the US dollar – an attempt to form a stable reference asset that is not as volatile as other major cryptocurrencies. Tether is by far the largest stablecoin in crypto, with a $80.7B market capitalization, and $150B of volume traded in the last 24 hours, according to Coingecko. USDC, the second-largest stablecoin, has about half the market cap.
RIPPLES Jitters around USDT follow the recent implosion of the Terra ecosystem’s stablecoin UST and its sister coin Luna. UST fell from its $1 peg and now sits at $0.43 while Luna has fallen 99% from $15 to $0.01 in the last 48 hours alone. And while Terra’s crash sent ripples throughout the market, a prolonged slide in Tether would likely cause a tsunami.
INFLATION The ongoing UST crisis has caused the LUNA supply to rise exponentially to nearly 34B tokens as UST holders rush to redeem their tokens, from around 350M on May 9. The resulting runaway inflation has seen the price of LUNA fall 98% to just $0.02 at the time of writing.
VALIDATORS Terra uses a Proof-of-Stake consensus mechanism that requires the majority of LUNA tokens to be staked with trustworthy validators who secure the network and process legitimate transactions.
🔗 David Marcus unveils new startup focused on Bitcoin and Lightning backed by a16z and Paradigm: the Block
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Listen to conversations between two veterans of the crypto industry: Su Zhu, CEO and CIO of Three Arrows Capital, and Hasu, Strategy lead at Flashbots. Exploring the big ideas in crypto from first principles.
The SEC’s “crypto mom” Hester Peirce has said the regulatory “movement” around stablecoins needs to allow for “trial and error” and room for failure.
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Update: UST & LUNA Crash Harder, 8000 ETH Moved by Azuki? t’s been less than 24 hours and things have changed, for the worse. UST went as low as 22 cents, Luna goes under 1 dollar, Do Kwon announced a recovery plan, and team Azuki is on the move.
Do Kwon Humbled as LUNA Spirals and UST Suffers ‘Lehman Moment’ “I understand the last 72 hours have been extremely tough on all of you,” Do Kwon tweeted Wednesday morning. “Extremely tough” will be an understatement for users who trusted their savings on a stablecoin – emphasis on the word “stable” – to now own only a small fraction of their initial holdings.
Coinbase Will Keep Customer Balances in Event of Bankruptcy Coinbase will take your coins if it goes bankrupt. That was the rather jarring message in the first quarter earnings release for the leading U.S.-based centralized exchange.
🧑💻 ✍️ Stories in The Defiant are written by Owen Fernau, Samuel Haig, Jason, Levin, DeFiDad, and yyctrader, and edited by Edward Robinson, yyctrader, and Camila Russo. Videos are produced by Robin Schmidt, Alp Gasimov and Daniel Flynn. Podcast is led by Camila, edited by Alp.
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