{"id":61139,"date":"2022-05-08T13:12:01","date_gmt":"2022-05-08T10:12:01","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=61139"},"modified":"2025-09-05T10:23:03","modified_gmt":"2025-09-05T07:23:03","slug":"ust-stablecoin-briefly-lost-its-peg-to-the-us-dollar-amid-anchor-outflows","status":"publish","type":"post","link":"https:\/\/forklog.com\/en\/ust-stablecoin-briefly-lost-its-peg-to-the-us-dollar-amid-anchor-outflows\/","title":{"rendered":"UST stablecoin briefly lost its peg to the US dollar amid Anchor outflows"},"content":{"rendered":"<p>Against the backdrop of a decline in deposit yields over just under two days, more than 2.2 billion UST were withdrawn from the Anchor protocol. As a result, the Terra ecosystem&#8217;s algorithmic stablecoin briefly lost its peg to the US dollar.<\/p>\n<p>At one point on May 8, the asset traded near $0.98, according to <a href=\"https:\/\/www.coingecko.com\/en\/coins\/terra-usd\/usd#panel\">CoinGecko<\/a>.<\/p>\n<figure class=\\\"wp-block-image size-large\\\"><img loading=\\\"lazy\\\" decoding=\\\"async\\\" width=\\\"1024\\\" height=\\\"427\\\" src=\\\"https:\/\/forklog.com\/wp-content\/uploads\/ustusd-1024x427.png\\\" alt=\\\"UST stablecoin briefly lost its peg to the US dollar amid outflows from Anchor\\\" class=\\\"wp-image-172421\\\" srcset=\\\"https:\/\/forklog.com\/wp-content\/uploads\/ustusd-1024x427.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/ustusd-300x125.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/ustusd-768x320.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/ustusd.png 1265w\\\" sizes=\\\"auto, (max-width: 1024px) 100vw, 1024px\\\" \/><figcaption>30-minute chart of UST\/USD. Data: CoinGecko.<\/figcaption><\/figure>\n<p>In March, the Anchor community voted for a proposal under which the deposit rate can change by up to 1.5% depending on the size of the yield reserve.<\/p>\n<p>According to <a href=\\\"https:\/\/terra.smartstake.io\/anc\\\">SmartStake<\/a>, over the last month the project&#8217;s reserves declined by almost 44%, to 180.45 million UST.<\/p>\n<figure class=\\\"wp-block-image size-full\\\"><img loading=\\\"lazy\\\" decoding=\\\"async\\\" width=\\\"938\\\" height=\\\"440\\\" src=\\\"https:\/\/forklog.com\/wp-content\/uploads\/reserves.png\\\" alt=\\\"UST stablecoin briefly lost its peg to the US dollar amid outflows from Anchor\\\" class=\\\"wp-image-172422\\\" srcset=\\\"https:\/\/forklog.com\/wp-content\/uploads\/reserves.png 938w, https:\/\/forklog.com\/wp-content\/uploads\/reserves-300x141.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/reserves-768x360.png 768w\\\" sizes=\\\"auto, (max-width: 938px) 100vw, 938px\\\" \/><figcaption>Data: SmartStake.<br \/><\/figcaption><\/figure>\n<p>Earlier, similar incidents had occurred with Anchor \u2014 in February 2022 the protocol&#8217;s reserve was nearly exhausted. To avert a collapse, the non-profit Luna Foundation Guard (LFG) <a href=\\\"https:\/\/agora.terra.money\/t\/capitalising-anchors-reserve-with-450m\/4236\/52\\\">transferred 450 million UST to the project<\/a>.<\/p>\n<p>However this time there were no capital injections. In early May, the deposit rate at Anchor was reduced for the first time to 18%. Its current level is even lower \u2014 17.87%.<\/p>\n<p>As a result, users began to withdraw assets en masse from the protocol. On May 7, Anchor&#8217;s deposits exceeded 14 billion UST \u2014 at the time of writing the figure stood at 11.77 billion UST (-16%).<\/p>\n<p>The Curve Finance team also confirmed that on May 7 &#8220;someone started selling en masse&#8221; UST, causing the stablecoin to briefly lose its peg to the US dollar. The developers noted that these actions &#8220;faced strong resistance&#8221; in the form of counter-sales of ETH and stETH.<\/p>\n<blockquote class=\\\"twitter-tweet\\\">\n<p lang=\\\"en\\\" dir=\\\"ltr\\\">News of Curve Wars \ud83c\udf08\u2694\ufe0f<\/p>\n<p>Yesterday, someone started selling UST en masse, so it started to depeg. However, that was met with a great resistance, so the peg was restored. To get enough USD for that, a lot of ETH and stETH were sold also.<\/p>\n<p>Aftermath? High Curve trading vol (>uni3) <a href=\\\"https:\/\/t.co\/ZChdZiVzcK\\\">pic.twitter.com\/ZChdZiVzcK<\/a><\/p>\n<p>\u2014 Curve Finance (@CurveFinance) <a href=\\\"https:\/\/twitter.com\/CurveFinance\/status\/1523170253316005890?ref_src=twsrc%5Etfw\\\">May 8, 2022<\/a><\/p><\/blockquote>\n<p> <script async=\\\"\\\" src=\\\"https:\/\/platform.twitter.com\/widgets.js\\\" charset=\\\"utf-8\\\"><\/script><\/p>\n<p>For example, Tron founder Justin Sun said he was buying UST, calling the move his \\&#8221;secret plan\\&#8221;. According to <a href=\\\"https:\/\/etherscan.io\/tx\/0x8d7ea6ad91367b6d44bcc188a22ff06fd09e74a516b6bca57f86c0bee8039fad\\\">Etherscan<\/a>, he purchased about 1 million UST, using USD Coin (USDC) for the purchase.<\/p>\n<figure class=\\\"wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter\\\">\n<div class=\\\"wp-block-embed__wrapper\\\">\n<blockquote class=\\\"twitter-tweet\\\" data-width=\\\"500\\\" data-dnt=\\\"true\\\">\n<p lang=\\\"en\\\" dir=\\\"ltr\\\">I am buying <a href=\\\"https:\/\/twitter.com\/hashtag\/UST?src=hash&#038;ref_src=twsrc%5Etfw\\\">#UST<\/a>. \ud83d\udc40<\/p>\n<p>\u2014 H.E. Justin Sun \ud83d\udc68\u200d\ud83d\ude80 (Astronaut Version) (@justinsuntron) <a href=\\\"https:\/\/twitter.com\/justinsuntron\/status\/1523198802118594560?ref_src=twsrc%5Etfw\\\">May 8, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\\\"https:\/\/platform.twitter.com\/widgets.js\\\" charset=\\\"utf-8\\\"><\/script>\n<\/div>\n<\/figure>\n<p>Earlier in the Tron network <a href=\"https:\/\/forklog.com\/en\/news\/algorithmic-stablecoin-usdd-launches-on-the-tron-network\">the launch<\/a> of the algorithmic stablecoin USDD, whose collateral model is similar to that used in the Terra ecosystem, took place.<\/p>\n<p>The stability mechanism of UST largely relies on arbitrageurs, so the decline in Anchor&#8217;s yield negatively affected their motivation to maintain parity of the stablecoin with the U.S. dollar.<\/p>\n<p>In March 2022, LFG <a href=\"https:\/\/forklog.com\/en\/news\/luna-foundation-guard-plows-more-than-1-billion-into-bitcoin-to-back-ust\">founded<\/a> a reserve Bitcoin fund, which should promptly provide liquidity needed to maintain a stable price for UST in BTC. In May the assets under its management <a href=\"https:\/\/forklog.com\/en\/news\/luna-foundation-guard-adds-37863-btc-worth-1-5-billion\">reached<\/a> 80 394 BTC.<\/p>\n<p>Some argued that the loss of UST&#8217;s peg could lead to the liquidation of part of the fund&#8217;s assets. For example, this was stated by Thanefield Capital&#8217;s head of trading under the alias resonancethis.<\/p>\n<blockquote class=\\\"twitter-tweet\\\">\n<p lang=\\\"en\\\" dir=\\\"ltr\\\">If Jump doesn\u2019t defend this soon then there\u2019s going to be an incoming $3.5B market sell for BTC<\/p>\n<p>FWIW I think the buy execution on that $3.5B was poor \u2014 insiders frontrunning\/public knowledge etc<\/p>\n<p>The reverse flow could therefore have a disproportionate impact<\/p>\n<p>\u2014 Resonance (@resonancethis) <a href=\\\"https:\/\/twitter.com\/resonancethis\/status\/1523051412934230016?ref_src=twsrc%5Etfw\\\">May 7, 2022<\/a><\/p><\/blockquote>\n<p> <script async=\\\"\\\" src=\\\"https:\/\/platform.twitter.com\/widgets.js\\\" charset=\\\"utf-8\\\"><\/script><\/p>\n<div class=\\\"wp-block-text-wrappers-update-2 article_update\\\"><time class=\\\"gtb_text-wrappers_update_time\\\">8 May 2022 | 19:00<\/time><span class=\\\"gtb_text-wrappers_update_head\\\">Update: <\/span><\/p>\n<p>The head of security for the Polygon project, Mudit Gupta, noted that the UST incident was accompanied by a number of suspicious operations.<\/p>\n<p>According to him, on May 7 Terraform Labs removed 150 million UST liquidity from Curve, after which an unknown newly created address transferred over 84 million UST to the Ethereum network. A few minutes later ETH were dumped, which caused the sell-off, Gupta said.<\/p>\n<p>Soon after that the company withdrew an additional 100 million UST from Curve.<\/p>\n<p>As the stablecoin&#8217;s price began to fall, an unknown market participant began selling ETH and buying UST. The latter traded below the peg, allowing a profit.<\/p>\n<blockquote class=\\\"twitter-tweet\\\">\n<p lang=\\\"en\\\" dir=\\\"ltr\\\">\u2014 Terraform Labs removed another $100m of UST liquidity from Curve soon after<br \/>\u2014 As UST started to depeg, an unknown actor started dumping ETH and buying UST ($100m+)<br \/>\u2014 As UST was trading below peg, they made a profit all while avoiding bad optics around dumping Ether<\/p>\n<p>\u2014 Mudit Gupta (@Mudit__Gupta) <a href=\\\"https:\/\/twitter.com\/Mudit__Gupta\/status\/1523306189089828865?ref_src=twsrc%5Etfw\\\">May 8, 2022<\/a><\/p><\/blockquote>\n<p> <script async=\\\"\\\" src=\\\"https:\/\/platform.twitter.com\/widgets.js\\\" charset=\\\"utf-8\\\"><\/script><\/p>\n<p>The founder of Terraform Labs, Do Kwon, explained that the company withdrew 150 million UST from Curve to prepare for the launch of the 4pool, scheduled for next week. After that, it withdrew another 100 million UST to \\&#8221;reduce the imbalance\\&#8221;.<\/p>\n<p>Kwon emphasised that Terraform Labs has nothing to do with the 84 million UST operation. He also added that the company has no incentive to depeg the stablecoin from the US dollar.<\/p>\n<blockquote class=\\\"twitter-tweet\\\">\n<p lang=\\\"en\\\" dir=\\\"ltr\\\">And not sure what possible profit would have been gained even if we tried \u2014 50bp spread on UST while luna giganuked?<\/p>\n<p>\u2014 Do Kwon \ud83c\udf15 (@stablekwon) <a href=\\\"https:\/\/twitter.com\/stablekwon\/status\/1523316792545792001?ref_src=twsrc%5Etfw\\\">May 8, 2022<\/a><\/p><\/blockquote>\n<p> <script async=\\\"\\\" src=\\\"https:\/\/platform.twitter.com\/widgets.js\\\" charset=\\\"utf-8\\\"><\/script><\/p>\n<\/div>\n<p>ForkLog wrote in a recent exclusive piece about how Anchor problems could affect the Terra economy:<\/p>\n<p>Tether&#8217;s chief technology officer Paolo Ardoino warned that <a href=\"https:\/\/forklog.com\/en\/news\/paolo-ardoino-high-cap-algorithmic-stablecoins-pose-risks-to-the-market\">algorithmic stablecoins with high capitalization are dangerous for the market<\/a>.<\/p>\n<p>Read ForkLog&#8217;s Bitcoin news in our <a href=\\\"\/\/telegram.me\/forklog\\\" target=\\\"\u201c_blank\u201d\\\" rel=\\\"\u201cnofollow\u201d noopener\\\">Telegram<\/a> \u2014 cryptocurrency news, prices and analysis.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Against the backdrop of a decline in deposit yields over a little more than two days, more than 2.2 billion UST were withdrawn from the Anchor protocol. As a result, the Terra ecosystem&#8217;s algorithmic stablecoin briefly lost its peg to the US dollar.<\/p>\n","protected":false},"author":1,"featured_media":61140,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"1","news_style_id":"1","cryptorium_level":"","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[3],"tags":[952,807,852],"class_list":["post-61139","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-and-analysis","tag-anchor","tag-stablecoins","tag-terra"],"aioseo_notices":[],"amp_enabled":true,"views":"35","promo_type":"1","layout_type":"1","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/61139","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/comments?post=61139"}],"version-history":[{"count":1,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/61139\/revisions"}],"predecessor-version":[{"id":61141,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/61139\/revisions\/61141"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/media\/61140"}],"wp:attachment":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/media?parent=61139"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/categories?post=61139"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/tags?post=61139"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}