Venus1100
Active member
Everyone in the crypto industry is talking about LUNA and UST, as well as the resulting chaos, which is producing a lot of FUD.
UST is a stablecoin for LUNA
Let's look at what's going on with LUNA and UST.
UST, a dollar-pegged stablecoin, has depegged twice in the last three to four days, causing early pandemonium, and is currently attempting to stabilize at $0.90 per dollar. UST is a decentralized algorithmic stablecoin that is not backed by any assets. It maintains its value using an arbitrage system and a protocol mechanism in which LUNA acts as a reserve asset throughout the transaction.
THE CREATION MECHANISM OF LUNA
You can always exchange LUNA for UST dollar for dollar, and vice versa. You could have redeemed LUNA for 100 UST and 100 UST for 1 LUNA when it was approximately $100.
If the price of UST is less than a dollar, you have the option of burning LUNA, then minting UST and profiting from the difference in the peg. If UST is worth more than a dollar, you can now burn it for LUNA to restore the peg.Many of them have been buying UST for less than a $1, receiving one dollar's worth of LUNA, and then selling it on the open market for a profit.
As a result of everything that's going on, the demand for UST is skyrocketing, and LUNA is being burned by the minute.
PROTOCOL ANCHOR
Anchor Protocol, a money market with roughly 74 percent demand in April 2022 for UST (about $12.3 billion out of $16.7 billion) because to its attractive 19.5 percent annual percentage yield, is Terra's stablecoin. According to market sources, the 74 percent was lowered to 40% in May 2022. In April, it was also discovered that the anchor reserve yield was melting at a rate of $122 million per month.
Jon Wu, in a tweet, provided an excellent example of the current market's FUD:
Say the price of LUNA is $1 billion. Then someone could mint 1 billion UST by burning a single LUNA. Then let’s say the price o it falls to $1 for no good reason. That person could redeem their stablecoin for 1 billion LUNA. So suddenly, again, for no good reason at all-there’s a shit-ton more LUNA in circulation being dumped on the open market. This is an essence of what’s happening today.”
Jon Wu
WHAT HAS HAPPENED TO UST/LUNA?
LUNA had lost almost 99 percent of its value when we were writing this essay. Will LUNA ever reach its all-time high or will it vanish into obscurity? Only time will tell, but everyone in the crypto market has learned the importance of Doing Your Own Research before investing, as this happening with a stablecoin was almost unthinkable and has raised a slew of new questions for the crypto industry to address.
UST is a stablecoin for LUNA
Let's look at what's going on with LUNA and UST.
UST, a dollar-pegged stablecoin, has depegged twice in the last three to four days, causing early pandemonium, and is currently attempting to stabilize at $0.90 per dollar. UST is a decentralized algorithmic stablecoin that is not backed by any assets. It maintains its value using an arbitrage system and a protocol mechanism in which LUNA acts as a reserve asset throughout the transaction.
THE CREATION MECHANISM OF LUNA
You can always exchange LUNA for UST dollar for dollar, and vice versa. You could have redeemed LUNA for 100 UST and 100 UST for 1 LUNA when it was approximately $100.
If the price of UST is less than a dollar, you have the option of burning LUNA, then minting UST and profiting from the difference in the peg. If UST is worth more than a dollar, you can now burn it for LUNA to restore the peg.Many of them have been buying UST for less than a $1, receiving one dollar's worth of LUNA, and then selling it on the open market for a profit.
As a result of everything that's going on, the demand for UST is skyrocketing, and LUNA is being burned by the minute.
PROTOCOL ANCHOR
Anchor Protocol, a money market with roughly 74 percent demand in April 2022 for UST (about $12.3 billion out of $16.7 billion) because to its attractive 19.5 percent annual percentage yield, is Terra's stablecoin. According to market sources, the 74 percent was lowered to 40% in May 2022. In April, it was also discovered that the anchor reserve yield was melting at a rate of $122 million per month.
Jon Wu, in a tweet, provided an excellent example of the current market's FUD:
Say the price of LUNA is $1 billion. Then someone could mint 1 billion UST by burning a single LUNA. Then let’s say the price o it falls to $1 for no good reason. That person could redeem their stablecoin for 1 billion LUNA. So suddenly, again, for no good reason at all-there’s a shit-ton more LUNA in circulation being dumped on the open market. This is an essence of what’s happening today.”
Jon Wu
WHAT HAS HAPPENED TO UST/LUNA?
LUNA had lost almost 99 percent of its value when we were writing this essay. Will LUNA ever reach its all-time high or will it vanish into obscurity? Only time will tell, but everyone in the crypto market has learned the importance of Doing Your Own Research before investing, as this happening with a stablecoin was almost unthinkable and has raised a slew of new questions for the crypto industry to address.
