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First, two traders broke UST’s peg; next, Terraform Labs and three supporters repaired it by purchasing $2B UST; finally, the continued sell-off drained those funds The rapid rise of the Terra stablecoin UST came to an early end when a liquidation cascade caused the price of the algorithmic dollar token to plunge to 60 cents. To First, two traders broke UST’s peg; next, Terraform Labs and three supporters repaired it by purchasing $2 billion UST; finally, the continued sell-off drained those A Nov. 9 technical audit report submitted by JS Held revealed the Luna Foundation Guard spent $2.8 billion to defend UST’s peg between May 8 and May 12. LFG accumulated more than $3 billion in its reserve, mostly in bitcoin (BTC), before UST first lost its 1:1 dollar peg on Sunday. However, the plan to connect the Dubbed Emergency measures for restoring Terra peg, the proposal aims to lower minimum interest rates to 3.5% and maximum deposit rates to 5.5%. Anchor is a The LFG revealed that its Bitcoin reserves had been depleted from 80,000 to just 313 Bitcoin in the failed attempt to maintain UST’s peg. This revelation marked the end of

Was a $2 Billion Investment to Save UST's Peg True? Unpacking the Terra Luna Collapse

The collapse of the Terra Luna ecosystem sent shockwaves through the cryptocurrency world. Central to this event was the stablecoin UST and a purported $2 billion investment aimed at maintaining its peg to the US dollar. But was this investment real, and did it succeed? Let's delve into the details.

The rapid rise of the Terra stablecoin UST came to an early end when a liquidation cascade caused the price of the algorithmic dollar token to plunge to 60 cents. To understand the situation, we need to examine the events leading up to the collapse. First, two traders broke UST’s peg; next, Terraform Labs and three supporters repaired it by purchasing $2B UST; finally, the continued sell-off drained those funds.

A Nov. 9 technical audit report submitted by JS Held revealed the Luna Foundation Guard (LFG) spent $2.8 billion to defend UST’s peg between May 8 and May 12. This clarifies that the amount spent was actually higher than the initially reported $2 billion figure. LFG accumulated more than $3 billion in its reserve, mostly in bitcoin (BTC), before UST first lost its 1:1 dollar peg on Sunday. However, the plan to connect the...

Emergency Measures and the Anchor Protocol

Dubbed Emergency measures for restoring Terra peg, the proposal aims to lower minimum interest rates to 3.5% and maximum deposit rates to 5.5%. Anchor is a... [protocol], played a significant role in UST's initial popularity. However, the high yields offered by Anchor proved unsustainable, contributing to the eventual collapse.

The Depletion of Bitcoin Reserves

The LFG revealed that its Bitcoin reserves had been depleted from 80,000 to just 313 Bitcoin in the failed attempt to maintain UST’s peg. This revelation marked the end of... any real hope of recovery. The initial $2 billion (actually $2.8 billion) investment, combined with the further depletion of Bitcoin reserves, ultimately failed to prevent UST's de-pegging. This serves as a crucial lesson about the inherent risks of algorithmic stablecoins and the limitations of even substantial financial interventions in the face of market panic and fundamental design flaws.

In conclusion, while the $2 billion (and more) investment to save UST's peg was indeed true, it ultimately proved insufficient to overcome the underlying issues plaguing the Terra Luna ecosystem. The rapid sell-off, coupled with the unsustainable Anchor protocol, led to the depletion of reserves and the eventual collapse of UST.

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