{"id":9676,"date":"2022-05-14T07:07:00","date_gmt":"2022-05-14T04:07:00","guid":{"rendered":"https:\/\/alfacash.blog\/?p=9676"},"modified":"2024-02-19T21:50:44","modified_gmt":"2024-02-19T18:50:44","slug":"terra-ust-collapse-what-means-crypto-market-2","status":"publish","type":"post","link":"https:\/\/alfacash.blog\/cs\/2022\/05\/14\/terra-ust-collapse-what-means-crypto-market-2\/","title":{"rendered":"Terra and UST collapse and what that means for the crypto market"},"content":{"rendered":"

We\u2019ve been passing through a bearish market in crypto, and it\u2019s been a familiar feeling. Been there, done that. However, the recent Terra (LUNA) total collapse in the wake of the de-pegging of its native stablecoin, TerraUSD (UST), is likely something else. They lost 99% in a few days, which traduces to erasing billions of dollars <\/strong>from investors worldwide.<\/p>\n\n\n\n

It\u2019s hard to say what really happened to Terra and UST. This is a whole blockchain ecosystem with the stablecoin UST as an epicenter \u2014until now, at least. It was founded by Daniel Shin and Do Kwon back in 2018, but, since the last year, experienced huge and quick growth<\/a>. In mid-May 2021, every LUNA was traded at $16. It didn\u2019t stop until its last All-Time-High (ATH) barely a month ago: over $119 per token (+643% in a year, by CMC).<\/p>\n\n\n\n

\"probl\u00e9my-krypto-platby-volatilita\"<\/figure><\/div>\n\n\n\n

Meanwhile, UST, as promised, maintained its peg to the U.S. Dollar (USD) in a 1:1 ratio. The methodology to do that wasn\u2019t the most popular among stablecoins, though<\/strong>. UST is (probably was) an algorithmic stablecoin<\/a>, which means no collateral to back it up. Instead, the price gained its stability from the investors and the code themselves.<\/p>\n\n\n\n

Jako oni vysv\u011btlil<\/a>, \u201cTerraUSD is an algorithmic stablecoin, where the cost of minting is equal to the face value of the stablecoins minted \u2014 in order to mint 1 TerraUSD, only $1 worth of the reserve asset ($LUNA) must be burned.\u201d Or, in other words, UST kept its 1 USD value by issuing and burning LUNA coins. Until May 8, 2022, that\u2019s it.<\/p>\n\n\n\n

Terra\u2019s deadly spiral<\/strong><\/h2>\n\n\n\n

The FUD<\/a> (Fear, Uncertainty, and Doubt) spread among UST and LUNA investors when the stablecoin started to lose its 1 USD peg on May 8<\/strong>. Back then, around 286 million UST were sold and the system was full of short positions. The whales were pulling off a big sell-off, and the market panicked<\/a>. Anchor Protocol, the most-used DeFi<\/a> platform on Terra, had withdrawals for over $2 billion in 24 hours.<\/p>\n\n\n\n

For the next day, UST was at $0.7 (around 30% less than it should be). On May 11, the price decreased to $0.3 (70% less). By the time of writing, UST is at $0.1 (90% less). LUNA was dragged into the deadly spiral, losing almost of its value. Bottom line: UST and LUNA had more sales pressure than they could handle. The investors lost trust in a system that previously worked, and for that, it collapsed. Why did all of this happen?<\/p>\n\n\n\n

As always, there are some theories around. While some blame<\/a> the protocol itself for not having any plan for this<\/strong>, some others are blaming the hedge fund Citadel and investment firm Blackrock for manipulating the market against Terra to get profits.<\/p>\n\n\n\n

\"Terra-collapse-theory-Reddit\"
Terra theory by someone Anonymous. Found on Reddit.<\/figcaption><\/figure><\/div>\n\n\n\n

Others talk about no-named OTC (Over-the-Counter) whales colluding to attack<\/a> Terra and UST. This way, they\u2019d been accumulating $1 billion UST, borrowed $3 billion in BTC, started to spread FUD, and then sold everything to increase the panic and destabilize UST and LUNA. <\/p>\n\n\n\n

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ok here is how the $luna<\/a> $ust<\/a> attack was coordinated & executed. \ud83e\uddf5 (quoted from a friend)

– attacker OTC accumulated $1bn of UST
– borrowed $3bn in $btc<\/a>
– spread around some fud about peg and bank runs
– dumped the fuck out of their $3bn $btc<\/a> on market to trigger wider panic<\/p>— 4484 (@4484) May 10, 2022<\/a><\/blockquote>