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Terra’s LUNA Tanks 15% after Native Stablecoin UST Loses Peg

UTC by Bhushan Akolkar · 3 min read
Terra’s LUNA Tanks 15% after Native Stablecoin UST Loses Peg
Photo: Unsplash

As per the report, a single whale served millions of UST on Binance and Curve. The Luna Foundation Guard has now initiated some corrective measures for the same.

On Sunday, May 8, TerraUSD (UST), the algorithmic stablecoin of the Terra crypto ecosystem struggled to maintain its peg with the USD. The price of UST touched a low of $0.9857.

As per some reports, a single user managed to dump 285 million UST on platforms like Binance and Curve. The UST trading volume skyrocketed by 300% during the same time. On-chain data provider Etherscan shows that a single whale swapped 85 million UST against Circle’s stablecoin USDC. The LUNA token, which helps UST to maintain its USD peg also tanked severely.

On Sunday, LUNA was trading over 15% slipping under $60. Furthermore, as per data from Terra Analytics, the circulating supply for LUNA increased by 957,201 in a single day. This was a record supply for LUNA for the first time since April 8.

Speaking to Decrypt, nagaking – the pseudonymous pool optimization researcher at Curve says there’s not much reason to worry. Heeplxinaed that the design of the bonding curves of Curve pools is such that “they take on some imbalance before shifting the price too much”. Nagaking further added:

“From the [liquidity pool] perspective, there’s only really a problem if the pool never reverts to near 50/50 balance, corresponding to 1:1 price. So, imbalance per se isn’t an issue, but as the pool becomes more imbalanced and prices deviate further from 1:1, one obviously becomes more concerned that price/pool balance may not revert to normalcy”.

Luna Foundation Guard Comes to Rescue

Earlier today, the Luna Foundation Guard announced some key measures to help UST maintain the Dollar peg. the LFG Council has voted to execute the following:

  1. Loan $750M worth of BTC to OTC trading firms to help protect the UST peg.
  2. Loan 750M UST to accumulate BTC as market conditions normalize.

The Luna Foundation Guard further wrote:

Per the LFG’s mandate, the LFG will proactively defend the stability of the $UST peg & broader Terra economy, especially under volatility and the uncertainty of macro conditions in legacy markets”.

To accomplish both events 1 & 2, traders will trade the capital on both sides of the market. This will help to maintain the parity of the LFG reserve pool which is in Bitcoins.

Last week itself, the Luna Foundation Guard purchased an additional $1.5 billion worth of Bitcoins. LFG has planned to accumulate $10 billion worth of Bitcoins as reserves to safeguard the UST stablecoin. Terra founder Do Kwon said that they will achieve this milestone by the end of Q3 2022.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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