On Wednesday, May 11, the Terra ecosystem’s algorithmic stablecoin TerraUSD (UST) again lost its peg to the US dollar. The cryptocurrency used to issue it, LUNA, collapsed by 76.4%, according to CoinGecko.
The UST price fell below $0.23. LUNA was trading around $4 (down about 85.9% over the last 24 hours).
As of writing, the asset traded around $8.60. Earlier on Friday, May 6, the price of LUNA was above $80. The chart below shows that the current decline has been accompanied by a surge in trading volume.
LUNA did not remain in the top 30 by market capitalisation. It has slipped 31 places.
On May 8, UST briefly lost its peg to the US dollar amid outflows from the Anchor protocol due to the deposit yield falling to 17.87%.
To protect the stability of UST and the Terra ecosystem as a whole, the Luna Foundation Guard (LFG) allocated loans for OTC desks totaling $750 million in BTC and $750 million in stablecoins.
On May 10, UST again lost its peg — quotes fell below $0.62. On the same day, sources at The Block reported plans for LFG to raise $1 billion to stabilise the stablecoin.
According to sources, the organisation is seeking funding from “some of the largest in the industry investment firms and market-makers.” The publication claims that as part of the deal investors would be offered to buy LUNA at a 50% discount.
Before that, Terraform Labs head Do Kwon announced a plan to restore the stablecoin’s price and its peg to $1. At the time of writing he had not disclosed details.
Close to announcing a recovery plan for $UST. Hang tight.
— Do Kwon 🌕 (@stablekwon) May 10, 2022
However rumors and issuance of LUNA around ~80 million would not help stabilise the UST price. As of writing, the asset’s price was hovering close to $0.30.
Market capitalisation of the stablecoin fell by 2 billion tokens over four days.
According to The Block Research analyst Miki Honkasalo, the fundraising attempt by LFG had “fallen apart”.
A few hours ago started hearing that the Luna fundraise had fallen apart.
Difficult to imagine any firm would put their reputation on the line back this dumpster fire.
It’s over.
(deleted original tweet about this to not jump the gun, but now it seems clear)
— mhonkasalo (@mhonkasalo) May 11, 2022
«It’s hard to imagine any firm would stake its reputation on a dumpster-fire. It’s all over», — wrote he.
Popular analyst Hasu noted that “UST is worse than BitConnect.”
UST is worse than Bitconnect.
At least Bitconnect didn’t masquerade as a stablecoin.
When your ponzi targets people’s savings (not investment) portfolio, there is a special place in hell reserved for you.
Half of CT influencers, VCs, and trading firms are complicit.
— Hasu⚡️🤖 (@hasufl) May 11, 2022
«At least, BitConnect didn’t masquerade as a stablecoin. When your financial pyramid targets people’s savings (not investment) portfolio, there is a special place in hell reserved for you. Half of influential figures, venture capitalists, and trading firms are complicit», — wrote him.
As ForkLog noted in a recent exclusive, Anchor’s problems could undermine Terra’s economy and the crypto markets.
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