Terra’s UST stablecoin, a darling of some crypto enthusiasts, is experiencing heavy pressure in recent market cycles.
Sam Kessler and Danny Nelson report at Coindesk that UST dropped to $0.65, which is bad for an asset the supposed to be pegged to the US dollar.
“The price action prompted the custodian of Terra’s Bitcoin reserves, the Luna Foundation Guard (LFG), to snap up and quickly deploy 28,205 Bitcoin in a bid to defend the peg by buying up UST and providing liquidity on exchanges,” the duo write. “That action coincided with a modest recovery in UST’s price; it surged from lows in the $0.65 range to $0.78 as of press time.”
Since then, the value has reportedly rebounded to $0.90, but in the interim, some are saying that the UST crash may have added to the burden on Bitcoin price, where BTC went as low as $30K before correcting a little as of this morning.
Terra apparently drained Bitcoin reserves of $1.5 billion to help with the downturn, and completed new acquisitions of $850 million.
“(Terra people) used their Bitcoin reserves to try to defend the peg, kind of like a flailing emerging market using its gold reserves to defend its FX,” wrote Lyn Alden yesterday, watching the bloodbath, and adding that the firm effectively destroyed the value of its LUNA token.
All of this drew criticism out of the woodwork.
“As Terra supporters continued to signal confidence on Monday, a crowd of longtime critics were quick to say ‘I told you so,’” write Kessler and Nelson. “Some even drew parallels between Terra and IRON Finance, a stablecoin that fell to zero last year in what was called crypto’s first large-scale bank run.”
What will happen to LUNA and UST? The result could have big ramifications for the stablecoin part of the crypto world. Stay tuned.
