Original author: 0x137, Rhythm BlockBeats

The phrase "everyone is looking forward to the end of the world" is a perfect way to describe the market sentiment since 2022. Because the CPI index was overheated, the market was full of voices to raise interest rates as soon as the beginning of the year, 25 points, 50 points, 75 points...

Now that the interest rate hike is here, the market has collapsed, and people have ushered in the end they have been calling for for a long time. Open the financial page, the headline is "Global stock markets have experienced the worst day in recent years", and the VIX panic index has reached an all-time high since the outbreak of the new crown.

In the case of such a global crash, "the Correlation of One" often occurs. When large-scale positions are exposed, people have to sell their other assets to fill the hole, causing the prices of all assets to plummet. .

This kind of "panic smashing" has also affected the currency circle, and both Bitcoin and Ethereum have fallen to varying degrees. Under the attack of panic and capital siege, Luna has become the worst "victim" of the current encryption market.

At 8 o'clock this morning, due to the price drop of Luna, which led to large-scale liquidation, Luna triggered the death spiral of "everyone's expectation". So far, the price of Luna has fallen to around $29, UST has dropped to around $0.6, and Luna Ponzi collapsed again.

This death spiral is the most serious one in the "History of UST Unanchor". "Luna Ponzi", a topic only discussed by hardcore players in the currency circle, even became a hot search on Weibo today.

What happened? Let's run through the process from the wee hours of last Sunday.

On the evening of May 8th, the giant whale warning account on Twitter began to "alarm" frantically, and every hour there was a message of selling UST, and the transaction amount was in the millions.

At this time, due to the selling pressure, UST has been unanchored to a certain extent, and the liquidity of the UST-3Crv pool has also begun to tilt, but LFG quickly stepped forward to fight the fire and prevented the situation from deteriorating further.

After reading this, you may be curious, isn’t UST’s market value 17 billion? How can such a small-level sell-off pose a threat to anchoring?

That's right, UST is currently the largest algorithmic stablecoin, and theoretically speaking, it should have the ability to resist strong selling pressure. But there is also a protocol strongly associated with UST: Anchor Protocol.

Sure enough, Yicha was taken aback. As of May 5, Anchor TVL rose to $18 billion, accounting for almost all of UST's market capitalization. In other words, almost all USTs on the market are stored in Anchor to earn 20% APY!

Because of the poor market performance, both giant whales and retail investors have all hid in the safe haven of stablecoins, and because of the stable and extremely high APY interest rate, switching assets to UST and depositing them in Anchor has become the most popular choice for people.

Stable currency interest rates have been as high as 20% for a long time, is Anchor also Ponzi?Stable currency interest rates have been as high as 20% for a long time, is Anchor also Ponzi?"In the article, I introduced in detail the huge troubles that high APY and high TVL have brought to Anchor savings and UST anchoring. What's more, many people also like Loop operations to increase their UST leverage and burn out one for Anchor savings. Big hole.

In order to prevent UST from being unanchored, LFG must ensure that the 18 billion UST locked in the Anchor will not escape in large numbers, because UST in the market has almost no liquidity. But we do know that some clever whales spotted the problem last Sunday and started a "collective migration".

The small breakout that occurred on May 8 was extremely negative for market sentiment, especially for Luna and UST holders. Starting from May 9th, a large amount of funds began to flee Anchor, which caused great pressure on the UST anchor. Seeing that the situation was not good, LFG immediately carried out a series of radical remedial measures. The following is the compilation of rhythm tracking reports:

09 May 13:02——Lend BTC to protect UST anchor

LFG announced that it will lend 750 million US dollars of BTC to the OTC trading platform to ensure the anchoring of UST and the US dollar. As the market returns to normal, LFG will lend (Loan) 750 million UST to buy BTC.

09 May 14:01— Declare not planning to cut bitcoin positions

LFG decided to deploy $1.5 billion in BTC/UST liquidity ($750 million for BTC and $750 million for UST) to ease market concerns surrounding UST. And declared that he would not liquidate his BTC positions.

May 10 at 08:11——28,205 BTC were transferred to the LFG address, worth $840 million

In the early morning of this morning, LFG transferred out all bitcoins under the address of about 42,530.8 pieces, worth 1.27 billion US dollars. Then 28,205.5 bitcoins were transferred in. As of the posting, the address held a total of 28,205.5 bitcoins, worth about 840 million US dollars.

With various remedies, the anchoring situation of UST was stabilized on May 9, but the panic in the crypto market is still spreading. Yesterday, the whole market was bloody, which made it even worse for Luna. According to DeFi Alpha statistics, Luna will start the first large-scale liquidation around $42, followed by $35, $33, $29...

At 7 o'clock this morning, Luna fell below $42 and triggered liquidation, and UST immediately fell off the anchor. Half an hour later, Luna fell below $35 to trigger the second liquidation, and UST broke through the previous low of $0.85. Currently, the price of Luna has fallen to $29, which is about to trigger a larger liquidation, and the loan value is currently in the hundreds of millions of dollars.

The slump of Luna and the serious de-anchoring of UST brought a near-"destructive" blow to the Terra ecology. The entire ecology was bleeding, TVL fell by 40% and hit 13 billion US dollars, and the TVL of several top agreements also suffered tragically. "Halved".

According to data from Coin Marketcap, the market value of UST evaporated nearly $4 billion in just a few hours this morning, and has now fallen to about $14 billion.

As UST's biggest "undertaker", Anchor has only 7 billion US dollars in deposits, which means that there are still 7 billion US dollars of UST "displaced" outside, which may be sold at any time. In order to absorb the UST circulating in the market, the APY of Anchor has once again been raised to more than 20%.

Conversation with Luna founder Do Kwon: UST's Bitcoin gameThe Lord of the Rings Dream of Algorithmic Stablecoins: After LUNA, there will be no next UST"and"Conversation with Luna founder Do Kwon: UST's Bitcoin game"The second article explained the endorsement dilemma of UST and the entire stablecoin market, as well as UST's own coping strategies.

In fact, this UST severe de-anchor is not the first time that Luna has triggered a death spiral. On May 19 last year, UST also experienced a serious de-anchor, and the price fell to 0.85 US dollars. Finally, under the rescue of LFG, Luna and UST were able to survive and develop. Since then, in order to prevent similar incidents from happening again, LFG has made a series of changes, including the new endorsement mechanism of UST.

In fact, buying native tokens of BTC and other L1 public chains as an endorsement is not a wrong choice, but it will take some time to realize the complete delivery of this new mechanism. It's a pity that the market did not leave enough opportunities for the Luna maniac Do Kown to redeem himself. The collapse of Luna this time was lost to time.

Now, what choice will LFG make? Can UST regain confidence? We will wait and see.