Terra’s native stablecoin TerraUSD (UST), which has been the talk of the town for the last few weeks now, is at its worst at the moment.
Stemming from UST liquidations and the broader market crash, UST is currently trading at a discount of 7%, while Terra’s native token LUNA is down by 37.6 on the week%.
Terra’s Stablecoin Loses Peg
The last 24 hours have been terribly uneventful for Terra ecosystem investors as TerraUSD, known to be the biggest decentralized stablecoin, lost its peg. The depegging was initiated due to a bunch of withdrawals from the biggest Dapp on Terra chain, Anchor Protocol.
The lending platform noted the total value locked on it declined. Most of the investors on the platform pulled their investments resulting in the total deposits on Anchor falling by $5 billion.
Currently, down from $14 billion, the deposits on the protocol only amount to $9.3 billion.
Following this, UST began being pulled out of liquidity pools on Curve, and Terra also joined in by liquidating $150 million in UST. Although it redeposited $100 million, the panic had already ensued.
It did not take too long for the UST peg to destabilize, and by the end of yesterday, UST was trading at a discount of 1.2%. However, at the time of writing, the broader market crash and Luna Foundation Guard’s (LFG) latest move has left the stablecoin broken.
LFG Sells $750 Million in Bitcoin
In a series of tweets, the LFG announced that owing to the bearish market condition, the organization will be selling about $750 million worth of Bitcoin.
However, they disguised this selling by calling it a loan to OTC trading firms and said that the same amount of Bitcoin would be repurchased as soon as the market conditions improved.
This left the LFG reserve balance at just $2.7 billion when it was at $3.9 billion a week ago. As reported by CoinCentral, the LFG had recently purchased $1.5 billion worth of Bitcoin for the reserve to inch closer to its $10 billion target.
However, this dumping left investors infuriated, and more people withdrew their Anchor deposits, leaving LUNA and UST in a bind.
At the time of this report, the stablecoin UST was trading at a 7.4% discount at $0.926, the lowest it has ever been at, and it seems like the LFG reserve has not been able to fix it actively.
Consequentially, with the broader market crashing and the Terra ecosystem noting backlashes from the community, the DeFi chain’s native token LUNA also plunged by 35.59%, leaving it trading at $43.86.
This crash added to the already bearish week where the altcoin lost over 20%, bringing the weekly decline to 45.57%.
Although, as per Terra founder Do Kwon about $1.5 billion in capital has already been deployed to stabilize the UST peg, it will be a while before it shows its effect.
7/ This will be an important opportunity for the terra and wider crypto community to gather empirical data on how LFG operates & fits into the Terra ecosystem.
Observe over the next few days not on whether LFG chose to deploy reserves, but on how.
— Do Kwon 🌕 (@stablekwon) May 9, 2022