(Kitco News) – A brief attack has prompted Terra’s LUNA to collapse by more than 97 percent in the last few days. This caused a corresponding drop in the price of UST, which fell to 2 cents in early Thursday.
According to Ronald AngSiy, this is the senior vice president for Intellabridge Technology, a defi company. AngSiy spoke with David Lynn, host and producer of Kitco News.
The UST, Terra’s stable coin, must have a one-on-one relationship with the US dollar. In this ecosystem, the user can always exchange the LUNA token for UST at a fixed price of $ 1 and vice versa. This exchange can happen even if the market prices of LUNA and UST differ from $ 1.
This in turn creates an opportunity for arbitration. If the market price of UST rises above $ 1, then LUNA users are encouraged to trade $ 1 from LUNA for a freshly cut UST token.
This process automatically destroys part of the LUNA from the circulation. This in turn reduces the supply of LUNA and increases its price. At the same time, the newly minted UST tokens increase supply and reduce the price of UST, returning it to $ 1.
Yet the alleged speculative attacks threatened this algorithm.
“Through chain analysis, we saw that there are two organizations that have sold over $ 400 million in 24 hours,” AngSiy said. “… And this caused a cascading liquidation effect throughout the ecosystem and caused a crisis of faith in it.”
AngSiy doesn’t hold back: “This is obviously a short attack.” The timing of this attack coincides with several things. One, [yield protocol] for the anchoring protocol, which ranged from 20 to 18.5 percent, it was kind of a media headline. Another is that many leading competitors are going online this summer … And thirdly, the very specific time for it, which is exactly after Terra has moved much of its UST off the curve. “
Without making any allegations, AngSiy cited Justin Sun’s tweets before the UST crash. Sun tweeted that there were “secret plans” for the UST. However, AngSiy also said that nothing illegal had happened and that cryptocurrencies were open to brief attacks due to unregulation.
AngSiy drew an analogy with George Soros, who briefed the Bank of England in 1992: “[Soros] it was just the catalyst that caused a huge sell-off of British pounds from various foreign exchange traders … So in this [UST] scenario, they just started the attack on Terra. And then there were a lot of people out there who naturally sold out. ”
Until Kuon, the founder of Terraform Labs, previously bought bitcoin to help stabilize the UST ecosystem.
However, according to AngSiy, the recent collapse of UST and LUNA is also related to the recent collapse of bitcoin prices.
“The large-scale sale of bitcoin was part of a way to stabilize the UST, as a way to force Terra to use its bitcoin reserves. And after Terra lent its bitcoins to an entity to use to buy UST, that entity took all the bitcoins it received from the loan and delayed the entire amount, “he said.
Reflecting on the lessons for crypto investors, AngSiy said: “[To] see [LUNA and UST] downloaded in two days, right, it just has to make you step back and reevaluate what’s actually safe in cryptocurrency. Is the whole thing a giant startup with an incredible risk profile, usually reserved for venture capitalists? “
To find out AngSiy’s forecasts for the future of stablecoins and which cryptocurrencies it buys, watch the video above.
Follow David Lynn on Twitter: @davidlin_TV
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