The central theses
- Terra’s UST lost its peg to the US dollar again this weekend, falling as low as $0.985.
- The Depeg event came after a series of multi-million dollar UST sell-offs.
- UST saw a slight rebound shortly after Terraform Labs CEO Do Kwon posted a tweet calling out the stablecoin’s critics.
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Terras UST experienced a similar Depeg event during a market-wide meltdown in May 2021.
More problems for UST
It’s been an eventful weekend for the Terra ecosystem.
Layer 1 blockchain UST stablecoin fell below $1 early Sunday amid high-pressure market conditions. The decentralized coin, which aims to track the price of the US dollar using a dual-token mechanism with Terra’s LUNA, briefly traded as low as $0.985 before staging a short-lived recovery. According to data from CoinGecko, it is trading at around $0.993 at press time.
The deprecation came after UST was hit by a string of multimillion-dollar selloffs. on-chain data shows that one account on Curve Finance traded about $85 million worth of UST against USDC, while another user reportedly sold on Binance worth $108 million.
The number of swaps on Curve later increased, sparking a small form of “bank run,” in which holders of an asset collectively withdraw their funds out of fear of bankruptcy problems. At one point, Curve’s pool of 3 was so unbalanced that UST made up over 60% of the pool (stablecoin pool ratios are generally considered to be much healthier when there is an equal balance of each coin).
As noted by Twitter user and crypto analyst 0xSisyphus, Binance briefly halted UST borrowing, likely to prevent customers from borrowing their assets to receive discounted UST to arbitrage on Curve. Elsewhere in the Terra ecosystem, UST borrowing surged to over $2 billion via the Anchor Protocol, the blockchain’s most widely used DeFi application. Terra’s native asset LUNA also fell 13%, falling as low as $62.60. At press time, it is trading closer to $61.50.
Terra stablecoin is revived like Kwon Surfaces
As rumors circulated on Twitter and the market showed signs of panic, Do Kwon, CEO of Terraform Labs and the self-proclaimed “Master of Stablecoin,” emerged to allay concerns about a possible Depeg crisis. “I’m up – fun morning… Anon you could listen to CT influencers for the 69th time about UST depegging…Or you could remember they’re all poor now and go for a run instead…Wyd,” he tweeted before posting a question that his critics could be interpreted as a sexist comment to show respect for his time zone. “If you girls wanna be fun please try during my waking hours,” he wrote, adding a long list of controversial tweets he’s posted over the past few months.
I’m up – fun morning
Anon, you might be listening to CT influences on UST depegging for the 69th time
Or you could remember that they are all poor now and go for a run instead
Far
— Do Kwon 🌕 (@stablekwon) May 7, 2022
Shortly after Kwon’s tweet, UST began to recover. On-chain data shows that around the same time, one address exchanged over 57,000 Ethereum tokens worth over $146 million for USDT and then traded the stablecoin on Curve for UST, likely in an attempt to rebuild the pool to even out and bring its price closer to $1. The same address also transferred 20,000 Ethereum to Binance.
Interestingly, this weekend’s chaos isn’t the first time UST has faced problems. In May 2021, when the cryptocurrency market experienced its latest brutal crash, UST fell as low as $0.96. The incident sparked fears that the stablecoin could one day go bankrupt, effectively killing Terra.
Aside from the UST incident, it’s been a disastrous weekend for Kwon and Terraform Labs. On Saturday, Crypto briefing revealed that the company had threatened legal action over a satirical April Fool’s Day article that mentioned Kwon. Crypto briefingEditor-in-chief of , Chris Williams, shared full details of the letter he received from Terraform Labs’ attorneys on Twitter Saturday, sparking widespread criticism of the company’s centralized nature and its rash PR blunder.
Disclosure: At the time of writing, the author of this article owned ETH, CRV, and several other cryptocurrencies.
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