The most stable stablecoin ecosystem in the crypto industry has shown signs of decline over the weekend as UST dropped its peg and Luna price plummeted.
Trading data over the weekend showed that TerraForm Labs is draining liquidity from the world’s third-largest stablecoin ecosystem.
On May 8, industry researcher Mudit Gupta tweeted the token movement, claiming that “the UST mess is so messed up.”
The transaction revealed a large amount of UST being removed from the Curve Finance DeFi protocol. This caused the stablecoin to drop its peg slightly, while arbitrageurs got in on the action.
TerraUSD drops its peg
Gupta did not accuse TerraForm Labs of de-pegging the stablecoin, but said the timing is questionable:
“Today’s events seem like a coordinated attack that could have been conducted using leaked insider information.”
UST fell from its peg on Sunday to a low of $0.990, while Luna suffered even higher losses. According to CoinGecko, the stablecoin was still trading at a little under a dollar when it stood at $0.996 at the time of writing.
Do Kwon, CEO of TerraForm Labs, responded to the tweet confirming that he had removed 150 million UST from the curve in preparation for the DeFi protocol’s deployment to the 4Pool liquidity pool. “After the imbalance started, we removed 100 million UST to bridge the imbalance,” he said, “clearly the company has no incentive to delist the stablecoin.”
Luna Foundation Guard on May 9 announced That it was preparing a loan of $750 million worth of bitcoin to over-the-counter (OTC) trading firms to help protect the UST peg.
do kwon Confirmed Actions began to emerge in the form of fears that the firm was selling its BTC stash.
“Have not sold bitcoin yet – txn has just run out. This is a debt to a market maker – if UST imbalance occurs we will use BTC to rebalance, and if there is a demand surplus we will buy BTC “
The whole episode has also raised the threat of centralization, with many noticing that the Terra ecosystem is not as decentralized as it claims.
luna price tank
Since the asset is collateralized by stablecoins, the shenanigans haven’t done anything good for Luna’s price. According to CoinGecko, LUNA is down by 8.5% or more over the past 12 hours to $61.82.
The coin is down 25% over the past week and is down 48% from its all-time high of $119 on April 5.