On the 10th of May, the UST dollar peg hit lows of $0.6. The stablecoin was challenged over thin liquidity, shortly after the Luna Foundation Guards (LFG) finished building its $3 billion treasures last week.
UST Dollar’s de-pegging first emerged as huge withdrawals from pool 53 in Anchor, and thereon, plunged from $1 to $0.98. Anchor is Terra’s largest yield-earning protocol that steered the highest demand to UST. In just a few days, UST highest profitability source (Anchor) lost 60% of its deposits to the de-pegging.
LFG’s proactive strategy for UST Dollar
This led to a sell-off of bitcoin by traders, and mutual anticipation that LFG would turn to liquidate its BTC reserves to sustain the peg. On May 9th, LFG announced a proactive strategy accordingly, which would involve decentralising its reserve strategy.
Shortly after the announcement, the disruption settled, but UST could not stabilize its $1 peg permanently. It declined to $0.9 and accelerated more pull-outs, which led to a $0.6 decrease. Even if the LFG manages to restore the peg, much damage has been done already.
Takeaways from the current UST situation
The UST stable coin keeps going farther from being a decentralized stablecoin, regardless of the recent efforts to maintain it. As a result of network congestion from UST withdrawals, LUNA’s price has experienced a sharp decline (standing at $13.68) and temporary suspension. While UST returned to a downward spiral, LUNA’s value dropped by 66% in 24 hours.
Meanwhile, it seems that the BTC reserves might not be sufficient enough to confidently maintain the peg.
UST might charge back up with LFG’s involvement, but the long-term effects on its reputation and the trust steadily garnered from investors will take longer to come out from. The state of the UST is a reminder that better frameworks should be established to include structural risks for similar algorithmic stable coins.
- Incoming Shiba Inu Rally? Over 22 Billion SHIB Tokens Burned Across 497 Transactions
- French Luxury Brand Balenciaga To Accept Crypto Payments In U.S.
- PayPal May Soon Accept All Forms Of Crypto Reveals Vice-President
- Crypto Analyst Predicts What Will Kickstart Next Bitcoin Bull Run
- Just-In: South Korea May Sue Crypto Exchanges Over Terra Crash
- Breaking: S. Korean Exchanges Redflag Litecoin Mimblewimble Update; May Delist LTC
- Just-In: PlanB Reveals Bitcoin S2F Prediction For 2024 Halving
- Heavy Outflows Force Investors to Seek Refuge In Multi-crypto Investment Products
- PlanB: When Will Bitcoin (BTC) Price Cross $500K?
- Case Study: P2E Gaming Projects Tackling The Barriers To Web3 Mass Adoption
- Ethereum Price Analysis: Triangle Pattern Foretells Upcoming Rally in ETH
- Zilliqa Price Analysis: Channel Breakout Hints ZIL Price to hit $0.1
- Bitcoin Price Analysis: Trapped Bullish Momentum Need Triangle Breakout
- FTM Price Analysis: Buyers Tease Breakout From Long-Coming Trendline
- GALA Price Analysis: High Momentum Fallout Warns $0.075 Fallout
- Solana Price Prediction 2022: Bulls to drive SOL Price to new Highs?
- Theta Price Prediction 2022 : Analysts Insights into the crucial Reversal levels
- Sandbox Price Prediction 2022 : Analysts Show Optimism Towards The Metaverse SAND Token
- Apecoin Price Prediction 2022 : The future of Web3 and NFTs ?
- Ethereum Classic Price Prediction 2022 : Here’s What to Expect from ETC Price ?