Original author:0x137, Rhythm BlockBeats
Original author:
, Rhythm BlockBeats
In 1997, the legendary financial killer Soros and his giant crocodile allies hunted the bubble market in Southeast Asia, sold a large number of Thai baht and quickly depleted the 30 billion US dollars of foreign exchange reserves of the Bank of Thailand, and finally forced the Thai baht to implement a floating exchange rate system, further pushing Southeast Asian countries into the financial market. The abyss of crisis.
These epic capital confrontation stories have been spread all over the streets and alleys of the world in the past ten years, becoming historical landmark events, and being studied repeatedly as textbooks. But who would have thought that the same story would be staged again in the encryption market with only 10 years of development history, and "real-time broadcast" in front of everyone through the traces on the chain.
On May 10, due to capital siege and debt crisis, the native algorithm stablecoin UST of the Terra ecology experienced a serious unanchor event, falling as low as $0.6. This second largest public chain ecosystem with a TVL of nearly 20 billion US dollars repeated the horror disaster of Thai Baht and Lehman in just 2 days.
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?
After the Federal Reserve announced another 50 basis point rate hike, the opportunity finally came. Since May, the Nasdaq index has continued to decline, and the market’s response to the macro situation has been extremely pessimistic. The price of Bitcoin has also fallen by nearly 10% for several consecutive days, and panic has spread rapidly throughout the encryption market. The Terra ecological core team LFG (Luna Foundation Guard) announced that it will adjust the UST-3Crv liquidity pool (UST's main on-chain trading venue) on May 8 to prepare for the establishment of its own powerful 4Crv pool.
All kinds of conditions created a perfect storm for capital hunting, so on the night of May 8th, the giants in the currency circle quietly launched their long-planned "encirclement and suppression plan".
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Phase 1: Take advantage of the UST-3Crv pool divestment gap to launch an offensive
In the early hours of May 8th, LFG withdrew USD 150 million of UST liquidity from the UST-3Crv pool in preparation for the establishment of the 4Crv pool. UST liquidity actually only needs about 300 million US dollars.
About 10 minutes later, a new address suddenly sold 84 million US dollars of UST, which seriously affected the balance of the 3crv pool.
In order to maintain the balance of liquidity in the UST-3Crv pool, LFG withdrew another US$100 million of UST from the fund pool.
At this time, rumors began to appear on Twitter, saying that the sell-off was directed and acted by LFG, and Terra founder Do Kwon immediately responded on Twitter.
It didn't take long for multiple whale accounts to sell UST on Binance, with each transaction amounting to a million dollars.
Up to now, this address has sold more than 50,000 ETHs to maintain the UST anchor, and there are currently less than 13 ETHs left on the address.
Until then, the attack was mainly done through the UST-3Crv pool, involving an amount of about $300 million. If LFG's $4 billion 4Crv pool had been established before this attack, the above attack would not be effective.
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The second stage: Anchor funds fled in large numbers due to panic
Due to the small decoupling incident in the early morning of the 8th, panic spread rapidly among UST and Luna holders. Starting from May 8, a large amount of UST locked in Anchor flowed into the market, further causing UST selling pressure.
During this period, LFG announced to "loan" its $700 million bitcoin savings to maintain the stability of UST.
But according to Do kwon, UST above $0.95 is not considered decoupling, so Bitcoin will not be used above this threshold.
This also explains why UST has not returned to the $1 anchor after the decoupling on the 8th.
However, LFG did not expect that the long-term failure of UST to return to anchoring brought great negative sentiment to the market. UST, which escaped from Anchor, began to sell on a large scale, and UST anchoring fell below the $0.95 threshold. LFG was forced to start liquidating Bitcoin savings, when Do Kwon tweeted again: "More funds are being mobilized."
This also quickly rebalanced the UST-3Crv pool, but the Bitcoin liquidation further drove its price down, and the market sentiment continued to deteriorate, leading to a large-scale liquidation of Luna, UST selling pressure further increased, and the UST-3Crv pool soon fell into out of balance.
On the morning of May 10th, Jump Trading and LFG may have realized that something was wrong, and stopped selling Bitcoin savings to protect the anchor. Despite the deterioration of the situation, UST plummeted all the way to $0.6. Although the anchor price rebounded later, the ratio of the UST-3Crv pool on the Curve platform was still seriously skewed, and the ratio was once 91.37%/8.63%.
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The third stage: behind-the-scenes transactions, rumors of institutional rescues began to spread
In addition, Binance also seems to be involved in the UST defense battle. According to Hasu, the director of "Uncommon Core", Binance forcibly set a trading floor price for the UST order book, and users were unable to submit orders under the $0.7 threshold for a long period of time.
This morning, news about LFG's financing came out again. According to sources, LFG is seeking help from institutions, hoping to raise US$1 billion to support UST. According to Larry, a researcher at The Block, the current financing details are: Jump Trading, Celsius, and Jane Street have agreed to the financing, with a commitment of about US$700 million, and Alameda Research has not yet agreed. The institution's condition is to get LUNA spot at a 50% price discount, lock it for one year, and unlock it linearly every month after one year. But at the same time, Larry emphasized that the financing has not yet been confirmed, and everything may change.
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Regulatory Shadows: Praying Mantises Catch Cicadas, Orioles Follow
While the current talk of UST unanchoring is all speculation, we have found extremely reliable information in the market. On the morning of May 10th, Raoul Pal, a well-known macro investor and founder of Real Vision, interviewed Do Kwon, founder of Terra, about the unanchoring of UST. Although the content of the conversation has not yet been broadcast, in the subsequent interview with Bankless, Raoul still revealed that Some details of this incident.
The Lord of the Rings Dream of Algorithmic Stablecoins: After LUNA, there will be no next USTThe Lord of the Rings Dream of Algorithmic Stablecoins: After LUNA, there will be no next UST"and"The 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
"In the second article, it has explained the endorsement dilemma of UST and the entire stable market, as well as UST's own coping strategies.
This time, UST’s 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. 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 Bitcoin 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. Had LFG's $4 billion 4Crv pool been formed, a crash like this might not have happened at all. But it is a pity that the market did not leave enough redemption opportunities for Do Kown, a Luna maniac. The collapse of Luna this time was lost to time.
Veteran DeFi players should know that the impact of this UST unanchoring may not only stay in the Terra ecology, just like the bankruptcy of Lehman Brothers, the collapse of the Luna ecology may affect the entire encryption market. But in the eyes of many people like Raoul, the worst impact of this unanchoring incident is actually at the regulatory level. The "mantis catching cicadas" of the crypto giants this time may also attract the "regulatory orioles" behind them. .
We know that the central banks of various countries have been vigorously popularizing their own digital currencies (CBDC) in recent years. UST, which is the “top card” in this way, is undoubtedly a perfect excuse for the regulators. Putting aside the question of whether UST can regain confidence, the previous remarks about "UST unanchoring may attract supervision" have begun to spread widely on Twitter, causing many people to worry.
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