Death Spiral of the $20b Marketcap of Terra (UST) Delisting from Binance and More
Terra has been the long time DeFi darling to several investors. However, the UST algorithmic stable coin went down in value from its $1 peg.
Do Kwon, the founder of Terra has sought fresh funding. The algorithmic stable coin based on math and software was expected to have the digital currency (UST) behave like the dollar. However, its value crashed dramatically.
This is the biggest ever test in DeFi and also the will of the backers of the Protocol who want to keep it going. The purpose of stable coins like UST is to make it possible for cryptocurrency traders to be able to make transactions easily without having to make the long way fiat to cryptocurrency conversion each time they want to trade.
Just a month ago, future was bright for Terra and Luna Foundation Guard (LFG) focused on providing collateral for LUNA. Then, the all-time high value of $119 helped buy more than $1.5 billion BTC to help with UST peg. However, the value of UST went down to 60 cents on Monday and eventually down by further 20 cents on Wednesday. The market value crashed from $18.4 billion to $5 billion.
Investors were caught off guard. Everything broke and there is complete capitulation.
Binance: Updates on Terra (LUNA) network congestion. The network is experiencing slowness and congestion, which is intermittently causing a high volume of pending Terra network withdrawal transactions on Binance.
We are continuously monitoring the network status and working to provide Binance users with the best possible experience. Please note there may be periods where LUNA network withdrawals are temporarily suspended due to the network congestion.
Further updates will be provided when necessary. Thank you and apologize for any inconvenience.
Binance Futures Announcement: Delisting of Coin-Margined LUNA Perpetual Contracts. Updates on the Leverage & Margin Tiers for USDT-Margined LUNA Perpetual Contracts.
Community Reaction: “After almost a decade in crypto, the only events recallable which rival the magnitude of this (*potential) as the full Terra/UST collapse are “Mt Gox and The DAO Hack”
The potential impact of a full death spiral of a $20b market cap stable coin and $40b mc L1 network cannot be understated.
Bitconnect, ICO scams, hard forks, bridge/exchange hacks, defi rugpulls, and other algo stable collapses don’t come close I thought I was a bit paranoid yesterday when pulling everything out of Anchor and UST. Very happy to watch from the sidelines now, better safe than sorry.
The worst part is while whales play their games, the smaller fish/new to crypto crowd baited by that 20% APY will get hit the hardest. This is going to give government agencies so much ammunition to regulate the industry and stifle innovation if it plays out poorly.”
The worst events in Crypto history. 1. Mt. Gox Hack 2. The Dao Hack (Ethereum) 3. Terra Luna Collapse We will learn and we will adapt. Crypto always bounces back.
Wrong order 1. Mt. Gox Hack 2. Terra Luna Collapse 3. The Dao Hack (Ethereum) At least the DAO hack was somewhat fixable with the hard fork.
Honestly, the Luna crash probably had the largest $ impact relative to when it happened. DAO exploit was roughly 60M at that time. Mt.Gox was ~500M at that time.
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