If you had 250M UST sitting in a pool and you noticed a sudden drop in that pool, would you also get out? Let's just say that you were the owner of Wallet A.

On May 7th at 9:44pm, Terraform Labs withdrew 150m UST from the Curve 3pool in order to get ready to fund the Curve 4 pool, which was to go live on Ethereum the week after. Prior to this withdrawal, there was about $650m UST in the 3pool. Terra, along with another growing algorithmic stablecoin FRAX, aimed to make the 4pool the most liquid trading pool on Curve. Terra had this goal in mind because of the way through which Curve Finance managed their pools; projects would compete to provide the deepest liquidity to their pools, with rewards being distributed in Curve’s native token, $CRV. The more CRV tokens a project holds, the more leverage they have to vote on how token rewards are distributed to the pools. This gives projects a huge incentive to add liquidity since the winning pool would generate higher yield on their stablecoins thus attracting more liquidity. Additionally, having a deep liquidity pool on Curve is especially important for an algorithmic stablecoin such as UST since it provides the deep liquidity necessary to maintain the token’s dollar peg. The removal of a large amount of UST from the Curve 3pool on May 7th made it more susceptible to disruption from a ‘whale’. Thirteen minutes later at 9:57pm, an anonymous wallet sold 85m UST into the Curve 3pool, causing an imbalance in the pool and causing UST to start to depeg. The wallet behind this swap has come to be known as “Wallet A”, and it is suspected that this swap was part of a planned attack on UST’s peg. It has become highly suspect as Wallet A, in addition to the 85m Curve transaction, also withdrew around 200m UST from Anchor on May 7th, and sold 108m UST on Binance causing UST to depeg on that exchange as well. Within one hour of this 85m UST swap on Curve, another trader swapped a total of 100m UST for USDC over the course of four trades further disrupting the pool’s balance. Terraform Labs responded by withdrawing another 100m UST from the pool in an attempt to rebalance the pool, but by this point the damage was done, and these large trades in quick succession had started to irreversibly break the UST peg.