Concerns about the crypto market’s continuing decline in value have increased in recent days. Two days ago on May 7, 2022, UST dipped down to $0.985 per unit against tether (USDT), and the stablecoin’s price drop invoked a great deal of speculation concerning UST losing its dollar peg. Luna Foundation Guard, (LFG) announced that it would lend out millions in bitcoin and UST to the Peg Protection Fund until normal market conditions return.
Crypto Market Carnage Strains Algorithmic Stablecoin UST’s Peg, Terra Supporters Claim Stablecoin Was Victimized by a ‘Coordinated Attack’
As billions of dollars flew out of the crypto market in the past week, the digital currency markets suffered tremendously. In order to safeguard their wealth against volatile markets, traders often turn to stablecoins when there is crypto market chaos. BTC’s price has fallen from $40,000/unit on May 4 to $32,637/coin on May 9. The entire crypto economy has followed BTC’s freefall and the entire lot of 13,432 tokens in existence is down 5.5% against the U.S. dollar.
These have fueled trading volumes for tether and usd coin, as well as many stablecoins such UST. UST’s value had fallen to $0.985 an unit on May 7 against USDT (tether). Although this is not a big deal as other stablecoins also have fallen below the $1 parity level, it does make a difference. topic of Terra’s stablecoin has been trending on social mediaForums over the last two days. Außerdem gibt es eine significantAnchor Protocol and Curve Financing refunded a certain amount of UST.
A few Terra supporters called the incident a “coordinated attack” and said the UST dumps were “deliberate.” On Sunday morning, one Terra supporter wrote: “We are again seeing a coordinated attack on UST. A single player dumps $285m of UST on Curve and Binance, followed by huge shorts on LUNA and thousands of tweets. So far, not a really successful attempt as the peg is almost back at 1 dollar.” At the time of writing, UST is the tenth-largest crypto asset in terms of market valuation and is changing hands for $0.995077 per unit.
Luna Foundation Guard Reveals Lending of $1.5 Billion in Crypto Assets to Defend UST’s Peg
After all the speculation, rumors, and conspiracy theories, on May 9, 2022, the Luna Foundation Guard (LFG) and Terra’s co-founder Do Kwon explained the team was taking steps to ensure the peg remains defended. “Over the past several days, market volatility across crypto assets has been significant,” LFG saidMonday. “The market turmoil is also reflected by the past week’s uncertain macro conditions across legacy asset classes.” LFG says that it is mandated to “proactively defend the stability of the UST peg [and] the broader Terra economy.”
LFG is available decided to lend out bitcoin (BTC) and the stablecoin UST in order to protect the stability of UST’s $1 parity. “The LFG Council has voted to execute the following: – Loan $750M worth of BTC to [over-the-counter]Trading firms will help to protect the UST peg. – Loan 750M UST to accumulate BTC as market conditions normalize,” the organization said on Monday. Terra’s co-founder, Do Kwon, further updated the public about the lending action. Kwon stressed that “LGF is not trying to exit its bitcoin position.” Kwon added that the main goal is to have capital in the hands of professional market makers.
The liquidity provided has two purposes; “Buy UST if price [is less than] peg” and “Buy BTC if price [is greater than or equal to] peg,” Kwon said, “thus significantly strengthening the liquidity around UST peg.” The Terra co-founder added:
We felt that it was important to have the capital available to us in order to make UST purchases and sells. However, UST is not a directional asset right now. We plan to redeem the loan in BTC as markets rebound, which will increase the amount of our reserves.
Essentially, LFG’s professional market makers will leverage the capital to protect both sides of the market to defend UST’s $1 parity. The recent discussions revolving around UST’s peg follow LFG buying up massive amounts of bitcoin (BTC) to keep in its decentralized forex reserve. LFG also purchased $100 million in AVAX. While LFG’s BTC wallet holds 42,530.82 bitcoin, it has not sent any funds. LFG acquired 37.863 bitcoin in two recent over-the counter deals. LFG is likely to have leveraged the last purchase made to lend capital to market makers, as it has not taken any withdrawals from the public BTC address.
What do you think about Terra’s co-founder and LFG deciding to lend BTC and UST to market makers so they can defend the stablecoin’s $1 parity? Please comment below to let us know your thoughts on this topic.
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