As per the recent reports by the judicially appointed managers at Hodlnaut, the 17,000+ customers of Hodlnaut lost in total an amount of $189.7millions which comprises 69% of the total cryptocurrencies assets, that the users had deposited at the platform. Hodlnaut is a cryptocurrency lending and borrowing platform headquarted in Singapore.
It is revealed in the judicially appointed manager’s investigation that Hodlnaut incurred such huge losses because of its major investments in the TerraUSD. The fall of terra in may this year has resulted in deep losses at Hodlnaut.
How Hodlnaut made such big losses to its customers?
In recent reports, it is revealed that Hodlnaut made huge amounts of investments into the TerraUSD also called UST. These investments were done by Hodlnaut on behalf of all the 17,000+ users of cryptocurrency assets with Hodlnaut, the cryptocurrency facilitator and exchange platform. Along with this, these investments were not disclosed by the company to all of its 17,000+ users until the fall of terra included due to the failure in the algorithm this year in may.
As the company had encouraged huge losses the company stopped its user’s cryptocurrency withdrawal options by the start of august this year. The company stated the issue of market unstable conditions for these withdrawal restrictions on the platform.
However, it was later revealed that the company has been holding all of its used deposits to stablecoin terra. The company has applied for judicial Management which will protect the company from legal proceedings in Singapore.
As of now, Hodlnaut holds the assets in the decentralized fiance’s cryptocurrency options like the Aave, Compound, and Convex. The company possessed assets worth $74 million contrary to a total liabilities of $267.6 million, which has resulted in a total shortfall of $193.6 million with the company for all of its customers.
How has the Terra cryptocurrency collapsed?
The massive withdrawals of terra UST, these withdrawals resulted from the speculation of the fall of the cryptocurrency from the protocol on which terra was made, that is anchor protocol. Along with this the terra currency holders converted their currency to one of terra sister currency luna with the process of a mint and burn system.
This caused a sudden increase in the demand for the luna and so the price drop of luna, this, in turn, destabilized the balancing system of the cryptocurrency market and the market witnessed a deep fall in the prices of terra UST cryptocurrency. With this fall the terra ecosystem and the cryptocurrency market lost $60 billion, as a market shock to entire the cryptocurrency environment.