Original Author: @0xTodd, Partner at Nothing Research
1.1 Seeing it build up Zhulou, seeing it collapse.
In fact, Luna's problem is only related to one word: "liquidity".
As a volatile asset with insufficient liquidity, Luna can mint UST at a 1:1 equivalent value, and with the help of Curve and other EX, it has obtained the fiat currency liquidity that Stablecoin only deserves. From that day on, it was doomed to die. And 20% APR is more of a total button for acceleration.
--origin--
2.1 Let me talk about the reason first, the fuse-UST big players left.
On May 8th, the enthusiastic Terra was preparing for the so-called "end of Curve War" 4pool (the new pool on Curve), and temporarily withdrew the liquidity of the old pool. However, the 8400w UST may be a misjudgment, or a snipe attack. It directly smashed the market price of UST on Curve, and broke the anchor of the unprepared UST at once.
2.2 Fermentation - Terra's error rescue PR.
I once said that confidence depends on confidence. If confidence is lost, it is the beginning of eternal doom.
After unanchoring, you should actually continue to fight chicken blood, drink chicken soup, and pass it lightly.
But Terra has been reverse PR: We are saving the market! We're going to hold this anchor.
It sucks and conveys negative confidence: you say you're healthy, so why see a doctor?
2.3 External conditions - the market is bad
Under the influence of U.S. institutions, BTC is highly linked with U.S. stocks. Affected by interest rate hikes and balance sheet shrinkage, U.S. stocks have been performing poorly, which has led to a continuous negative decline in BTC. Unfortunately, LFG made the wrong decision at the wrong time. Since the average cost of LFG's 10w BTC is around 4w, it can't cut the meat at this time, and the rescue tray needs money. LFG had no choice but to mortgage BTC to the market maker in exchange for legal currency to support UST.
2.4 Deterioration
However, BTC continued to fall, which made it even more difficult for LFG. If UST continues to de-anchor, the newly mortgaged BTC is also at risk of liquidation. So we can see that LFG will soon transfer all the remaining BTC out, maybe selling it, maybe keeping the fruit, or more likely to replenish the margin, which makes the situation completely worse.
LFG address tracking: https://bitinfocharts.com/bitcoin/wallet/Luna-LFG
2.5
Because, the narrative of "UST-BTC common rise and fall" just established is officially declared shattered. This brought about a new round of FUD that led to today's situation.
--dilemma--
3.1 What is the current predicament of DK?
In the case of lack of funds, it is impossible to fully protect the plate. He needs to make a difficult decision-whether to protect Luna or UST. Because there is not much ammunition left, you have to do your best to keep one.
3.2 Paul Luna
Then it is necessary to manually increase the price of the oracle machine (using the expected price), abandon the 1:1 rigid exchange mechanism, and instead maintain Luna’s premium for UST, in a disguised way to make UST burners retreat. Just burn UST. For example, the market price of Luna is 1.1, but the burning price is 1.3. There is very little room for arbitrage, which is why UST has not returned to anchor so far.
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Burn UST for Luna
3.3 Guaranteed UST
Then it is necessary to see the UST replaced by Luna and smashed, so that the anchor can be returned. But Luna has less than $1 left. The market value of Luna is only 1/5 of that of UST. Even if it is smashed to pieces, it is not enough for UST holders to withdraw.
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「technically insolvent」
3.4 DK's response
Maybe after careful consideration, on May 11th, DK finally wrote a short thread, with only one sentence to the effect, he still wanted to keep UST.
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Tweet of DK
3.5 Breaking through the psychological defense
However, after he posted this article, everyone also understood his intention: it seems that he wants to give up Luna.
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Ann of Binance
--Deduction--
4.1 Deduction-Can UST really be kept?
Liquidity is everything. This is also the subject of our thread.
Looking at the audience, although UST currently has 0.8U, Curve's liquidity is close to drying up to less than 2000w, and there are 300w left on Terraswap and Astro. Binance, FTX's handicap UST, Luna may still look like a small million.
However, there are 13 billion UST wanting to run.
4.2
I have come into contact with many Luna farmers, most of them are extremely smart, and of course some are deceived, especially ordinary people/small and medium companies in Korea, let’s not list them for the time being. In any case, under the current circumstances, it is everyone's consensus to run.
4.3
However, the escape quota is less than 1%. UST seems to have 0.8U left, and many people fantasize about returning to the anchor. But the fact is cruel, only tens of millions of UST can enjoy the escape price of 0.8, while the remaining 10 billion+ billion is 0.
Thousands of words into one sentence: Not enough liquidity!
Without liquidity, any token is waste paper. This is the difference between Ponzi and real assets.
--the way out--
5.1 So what to do?
So what if you try your best to keep one? The back is still running out of ammunition and food.
I admire DK's operational ability and charisma. But no matter how good a person is, he cannot overcome things beyond his ability and must rely on external forces.
After careful consideration, there may be three final ways out.
5.2 Way out one
Looking forward to the miraculous rebound of U.S. stocks, BTC followed U.S. stocks and quickly returned to 4w and then 5w, and the entire market re-entered Fomo.
However, under the current expectation of raising interest rates and shrinking the balance sheet, such conditions are hardly met, and the possibility is very small.
5.3 The second way out
Convince Jump trading and count on market makers to save their lives. Other Luna investment institutions, such as 3AC and Binance, made it clear that they wanted to stop losses, but Jump, which is deeply bound, may save them.
But the problem is: to revive it, at least billions of dollars are needed. But if billions of dollars are spent, the price of the currency is saved, but everyone runs away, then the project seems to have no need to exist.
5.3+
And, judging from what the block says, it appears that Luna's funding plan failed.
5.4 Way out three
shock therapy.
As the name suggests, let it go.
For example, when Luna falls back to 0.01 and UST falls to 0.01, then with LFG's current strength, it is hopeful to get them all back. But at what cost? I think everyone understands.
The last shock therapy project, such as Basis Cash, was once the third generation king. You can see how much money is left in the algorithm-guaranteed "USD Stablecoin" BAC.
5.4+
PS: Interestingly, Terra employees broke the news that DK is also an important participant in BAC.
--Impressions--
6.1 Talk about something else.
I like Twitter very much, but the only dissatisfaction with the CT atmosphere is that many people don't tell you the risks behind this thing, but directly use Few and NGMI to describe people who don't embrace Ponzi.
What's more, they like to embrace ponzi enthusiastically, boast that ponzi has reached the sky, and try to smash it to the receiver after other people come in, and are complacent about their escape.
6.2
In the past two days, I went to Terra's Discord (its Tele seems to have been reported and cannot join), and I also listened to many Twitter spaces. Many foreigners have devoted all their life-savings to Anchor, and now they are very helpless and painful, and they can even hear their faint cries when they speak.
Many people have been deceived, by DK, by Terra, and by these people who claim to embrace Ponzi, and their half-life savings have been turned into paper wealth without any liquidity.
6.3
I'm not a big KOL, I'm just a crypto researcher, and I manage a small crypto fund (@NothingResearch) with my partner, and the money in it is basically our own. I don't take ads, I don't take rebates, and as I said before, my idol is @ZachXBT, and he is famous for debunking scams.
6.4
My conscience drives me to write these words in the last six months. Many of my friends hold luna, maybe I am against luna too much, I even feel that they are quite critical of me.
If you look through my twitter, you will know that for a long time, I was reluctant to mention Luna's name directly, for fear of provoking the scolding of Luna Holder. Of course, I don't blame them, after all, I want to go to cx after buying crypto.
6.5
But I still want to say that when I meet Ponzi, I will still point it out firmly.
This is a matter of principle. Every time I save a person, I feel a little more at ease.
The above content is purely random thoughts, comrades who are not interested, please ignore it.
--at last--
7.1 Back to Luna
I don't recommend going short with large funds at this point, centipede, dead but not stiff. Although the Luna of 1 knife is going towards 0 knife in the end, it may return to 2 or 4 dollars for a short time. I also don't recommend jumping sideways and bands repeatedly, because most people will only return the principal to the exchange slowly.
7.2
Maybe UST still has some room to fall, but of course its upside is not much, the highest is 1;
Perhaps $ANC and other ecological projects on the Terra chain will not have a better life. Refer to the current status of the Tianwang project on EOS;
Maybe DK will be able to turn the tide once again, but I'm afraid it will be the last time, and the odds of winning are really too low.
7.3
Finally, many friends are obsessed with algorithmic Stablecoins, including me.
I think Suanwen is an elf in the DeFi forest, so tempting, maybe it is close at hand, but maybe it doesn't exist at all, but it has attracted countless people to follow.
But be careful not to bet all your chips on social experiments.
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