The Terra-Luna contagion behind the FTX-Alameda collapse, a Nansen analysis reveals

FTX-Alameda implosion likely triggered by Terra-Luna domino effect, Nansen suggests

Nov 22, 2022
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An analysis by crypto analytics firm Nansen notes that the Terra stablecoin collapse likely started the domino effect that led to FTX’s implosion.

Blockchain analytics firm Nansen has published an in-depth analysis using on-chain data to piece together the fallen dominos of FTX and Alameda, finding that the de-pegging of TerraUSD, Luna’s failure, and the bankruptcy of 3AC could have all lead to FTX and Alameda’s fall from grace.

The lengthy report released on Nov. 16 argues that the eventual collapse of Alameda (and the resulting impact on FTX) was inevitable as the Luna/Terra collapse revealed a deep flaw between Alameda and FTX’s muddled relationship. “There were significant FTT outflows from Alameda to FTX around the Terra-Luna/ 3AC situation. Based on the data, the total $4b FTT outflows from Alameda to FTX in June and July could possibly have been the provision of collateral that was used to secure the loans (worth at least $4b) in May/June that was revealed by several people close to Bankman-Fried in a Reuters interview,” the firm reveal in the report.

Further, Nansen observed “slightly unusual large continuous outflows of stablecoin tokens from FTX to Alameda’s wallets” during “the cascading effect of the Luna collapse” when many firms like 3AC were liquidated causing a contagion across the crypto lending market. The analysts explains that “while our on-chain investigation did not directly verify that user funds were being siphoned from FTX to Alameda in attempts to ‘save’ them from liquidation, the unusually large FTT inflows from FTX post-Luna/ 3AC hint at a plausible case.”

Nansen researchers concluded that since then, “the intermingled relationship between Alameda and FTX became more troubling, given that customer funds were also in the equation. Alameda was at the stage where survival was its chosen priority, and if one entity collapses, more trouble could start brewing for FTX. Given how intertwined these entities were set up to operate, along with the over-leverage of collateral, our post-mortem on-chain analysis hints that the eventual collapse of Alameda (and the resulting impact on FTX) was, perhaps, inevitable.”