CRYPTO

Citadel, BlackRock and Gemini deny involvement in UST collapse

Following the collapse of LUNA and UST, the cryptocurrency community have been looking for who to blame, as many have fingered the collapse for the increased selling pressure in the market that has seen Bitcoin trade below $27,000.

A conspiracy theory, amplified by Charles Hoskinson, the founder of the famous and community-driven blockchain, the Cardano blockchain and the co-founder of Ethereum, accused BlackRock and Citadel of borrowing 100,000 bitcoin from Gemini and swapped 25% for UST. Then the two companies dumped the UST and BTC crashing Luna and the price of bitcoin.

However, the allegations have been met by denials from the mentioned parties as they all categorically deny them. BlackRock went as far as to release a press release stating that they had no involvement in the crash of LUNA and UST.

Hoskinson’s allegation

Charles Hoskinson tweeted an image of a conversation which stated, “Blackrock and Citadel borrowed 100K BTC from Gemini (it appears in their loan book). They swapped 25K of that BTC into UST; this was all done quietly in anticipation of the attack.

“When the time was right, they called up Do Kwon at Terra Foundation and said they wanted to sell a lot of BC for UST. As it was a large trade they told him they didn’t want to move the market and asked if he would like to buy their large block of BTC at a discount for UST. Do Kwan took the bait. He gave them a huge chunk of UST, thus lowering the UST liquidity significantly. At that point, Blackrock/Citadel dumped all of the BTC and UST causing massive slippage and triggering a cascade of forced selling in both assets.

“The real problem was Blackrock/Citadel knew that Anchor, which holds a lot of LUNA, was a Ponzi scheme (they offer 20% staking APY for Christsake) and this crash would trigger more withdrawals than Anchor can repay. These forced withdrawals and selling would trigger a massive selloff in Luna, thus further breaking the $1 peg and wrecking the market further.

“Blackrock and Citadel can now buy the BTC back cheaply to repay the loan and pocket the difference. Meanwhile, billions of longs and Bitcoin VaR were wiped out. This was pure market manipulation.”

What you should know

  • While BlackRock manages cash reserves for USDC, it said in a public statement it doesn’t trade UST.
  • Likewise, Citadel Securities has publicly stated that it does not trade in stablecoins.
  • Gemini said in a tweet that it has made no such loan as claimed in the conspiracy theory.
  • Charles Hoskinson, the founder of Cardano and co-founder of Ethereum, amplified this evidence-free narrative on Twitter before deleting the tweet.

Meanwhile, crypto hedge fund Arca has told its partners that it is doubling down on UST as it believes the algorithmic stablecoin will ultimately recover and maintain its peg.

LUNA is currently trading $0.10 with a market capitalization of $370 million. UST is still depegged to the U.S. dollar as it currently trades $0.63 as of the time of this writing.


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