The UST stablecoin loses its peg for a short moment and right after Luna dropped by 10% so now questions emerge about whether Terra’s BTC reserves will face their first test so let’s find out more today in our latest cryptocurrency news.
The TerraUSD or UST stablecoin loses its peg shortly and fell to .987 before bouncing back on Sunday and its sister token LUNA also crashed by 10%. As the biggest algorithmic stablecoin, UST emerged as a controversial backbone of the crypto economy and this depeg was not the first and biggest one in Terra’s history but does mark the first time the stablecoin lost its peg after it embarked on the bid to build out BTC and Avalanche reserves.
I’m up – amusing morning
Anon, you could listen to CT influensooors about UST depegging for the 69th time
Or you could remember they’re all now poor, and go for a run instead
— Do Kwon 🌕 (@stablekwon) May 7, 2022
The depeg didn’t cause Terra to tap into the BTC reserves on Saturday as the deployment of millions of dollars of rescue capital seemed enough to buoy the token back to $1. The de-pegging seemed to kick off a series of major withdrawals from Anchor Protocol as a lending market that offers high yields to users that deposit UST. Anchor’s total UST deposits also fell from $14 billion to $11.2 billion. The larger quantities of UST were withdrawn from liquidity pools on Curve as a Defi protocol which allows users to swap between the stable currencies such as UST. The $150 million liquidity withdrawal came from tErra creators Terraform Labs which claimed that they made the withdrawal as they were trying to shuffle around funds between pools but they re-deposited $100 million after seeing that UST started trading a discount relative to other stablecoins.
Adding to the conspiracy, a single wallet also raised some eyebrows for dumping $84 million worth of UST on Etheruem and $108 million on Binance which led to calls from within the community that the depeg was a coordinated attack. Do Kwon the founder of Terraform Labs, joked about the circulating fud but then tweeted a chart with a claim that oen wallet was responsible for 62% of the Anchor withdrawals. He deleted the tweet later and realized that the 62% figure on the chart referred to other wallets rather than the speciifc wallet.
After Kwon started tweeting, a single wallet seemingly wanted to rescue UST’s peg and in the span of around 10 minutes, the wallet swapped over $200 million of UST for Terra in order to rebalance the UST curve pools and boost the price. More swaps continued over the weekend and the UST peg slightly recovered. Some speculated that the wallet belongs to Jump Crypto which is a financial firm with strogn tries to the Terraform Labs and Terra itself while Jump is the same company that stepped in to backstop the $320 million exploit of the Solana wormhole bridge in February.
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