It was the market’s sixth consecutive weekly decline, but on Crypto Twitter, the industry’s eyes were pinned on UST’s historic depegging.
Terra’s dollar-pegged algorithmic stablecoin collapsed, bottoming out at $.13 on Friday, causing a domino effect where the price of LUNA nosedived to virtually zero as people rushed to exit UST by redeeming it for LUNA, which is currently worth a fraction of a cent as UST trades at $.17.
Nic Carter, a blockchain journalist and general partner at the crypto-centred Castle Island Ventures investment firm pointed out the irony of Terra’s collapse. Do Kwon may believe that “decentralized economies deserve decentralized money,” but would a truly decentralized currency let its creator take measures like this?
For those following along, the decentralized stablecoin has declared a bank holiday by installing limits on onchain redemptions and getting major markets to suspend trading
It’s worth noting that the similarities between Sun and Kwon go beyond having common stablecoin ideas, or the fact that at one point both CEOs wanted to invest in $10 billion Bitcoin reserves for their stablecoins. Even when it was worth a dollar, virtually the only purpose of holding Terra’s UST was to lock it up in DeFi protocol Anchor, which promised stakers 20% returns. This week, Tron promised returns of up to 30% for staking its own newly issued USDD stablecoin on lending protocol JustLend.
At the height of LUNA’s collapse, Sun started FUDding his own creation.
But Justin Sun has little reason to fear. While TRX is currently down 23% from last week—a normal dip for a leading project—LUNA is down … more than 99%.
Binance CEO Changpeng Zhao said he was “very disappointed” with Terra’s handling of the situation, and said the Terra team stood “in sharp contrast to Axie Infinity, where the team took accountability, had a plan, and were communicating with us proactively.”
5. I am very disappointed with how this UST/LUNA incident was handled (or not handled) by the Terra team. We requested their team to restore the network, burn the extra minted LUNA, and recover the UST peg. So far, we have not gotten any positive response, or much response at all
It should be noted that CZ’s own “handling” of the situation involved delisting all LUNA trading pairs before resuming LUNA trades again exclusively against BUSD, Binance’s dollar-pegged stablecoin. Binance also originally had a limit that stopped UST trades if the price dropped below 70 cents, but by Tuesday the exchange had removed this safeguard. Because profits.
Finally, Cardano creator and Ethereum co-founder had a brief and catty exchange with Do Kwon.
There were accusations that the crash was the result of foul play by attackers with insider knowledge. Crypto enthusiast @napgener blamed Citadel, accusing the American hedge fund giant of borrowing $100,000 in Bitcoin, trading it for UST and then dumping that UST to wipe out the market.
One of the worlds most credit worthy firms:
Borrowed 100k $BTC Shorted into Kwons Twap buying Swapped 25k $BTC to TaeKwonDo for $UST Aggressively dumped the remainder on spot over past week. Started unloading $UST near bottom
Other variations on this theory implicated asset management giant BlackRock in the plot, along with crypto exchange Gemini. Both BlackRock and Citadel denied the accusations in emails to Forbes. Gemini denied the accusation in a tweet that same day.
We are aware of a recent story that suggested Gemini made a 100K BTC loan to large institutional counter-parties that reportedly resulted in a selloff in $LUNA. Gemini made no such loan.
Meanwhile, security researcher Eric Tung memed the LUNAtic coping theories.
That said, blockchain sleuth Onchain Wizard posted a remarkably popular theory of his own, suggesting that the depegging actually may have been an attack.
How to make a >800 million dollars in crypto attacking the once 3rd largest stablecoin, Soros style:
Everyone is talking about the $UST attack right now, including Janet Yellen. But no one is talking about how much money the attacker made (or how brilliant it was). Lets dig in🧵 pic.twitter.com/nGVfqjpVJb
It’s interesting that he references Soros’s 1992 bet against the Bank of England. Last year, a tweeter called @FreddieRaynolds warned that Terra was susceptible to a “Soros style” attack. At the time, Do Kwon dismissed that thread as “Probably the most retarded thread I’ve read this decade.”
Probably the most retarded thread ive read this decade.
Silence is a perfectly acceptable option if stupid.