The value of UST fell to USD 0.987 before recovering within one day, but critics consider it is risky to the cryptocurrency market. The price of LUNA plummeted by around 10% between April 7th and 9th due to fear of parity loss by UST.
On May 7th, the TerraUSD (UST) stablecoin briefly lost parity with the USD dollar while the price of LUNA dropped by 10%. There began to arise questions about whether Terra would face the first tests of its reserves in Bitcoin soon.
The price of TerraUSD (UST) briefly fell to USD 0.987 before recovering the following day. That was the first time the stablecoin had lost its peg since it embarked on building Bitcoin and Avalanche reserves.
Some critics consider that the stablecoin UST put the cryptocurrency market at risk. By the way, data from CoinMarketCap indicate that UST and LUNA occupy 9th and 10th places in the cryptocurrency ranking.
LUNA is trading at around USD 46.85 and has accumulated a 30.2% loss over the last 24 hours. Its trading volume is above USD 4.97 billion, and its market capitalization is about USD 15.75 billion. Meanwhile, UST has lost parity and is now trading at around USD 0.94, according to CoinGecko.
The Price of LUNA Drops by 10%
The price of LUNA, the native token of Terra, plummeted by around 10% between April 7th and 8th. That happened due to fear that the UST stablecoin could lose its parity with the USD dollar.
The unpegging between the stablecoin and the fiat currency may have started with massive withdrawals from Anchor Protocol. Over the weekend, the UST deposits in that decentralized money market fell from USD 14 billion to USD 11.2 billion.
There were also withdrawals of the stablecoin UST from the liquidity pools on Curve Finance. Terraform Labs (TFL), the creators of Terra made a withdrawal of USD 150 million in liquidity.
Korea-based company TFL claimed they withdrew that amount as they prepared to commingle funds between groups. However, they redeposited USD 100 million after realizing that UST had started trading at a discount compared to other stablecoins.
Do Kwon, the CEO, and founder of Terraform Labs, tweeted that a wallet made 62% of the withdrawals from Anchor Protocol. However, the Korean entrepreneur quickly deleted that post from his Twitter account.
It is relevant to remember that stablecoins are cryptocurrencies pegged to fiat currencies like the US dollar at a 1:1 ratio. In addition, unpegging refers to stablecoins rising above USD 1 or dropping below USD 1.
Those Supporting the Terra Ecosystem Give their Opinion
The supporters of the Terra ecosystem, known as lunatics, consider the events leading to the recent decline of UST a conspiracy.
Caetano Manfrini is the legal head of the Brazilian cryptocurrency consortium GEMMA Ecosystem. He wrote on Twitter that the attack on LUNA and UST was deliberate and coordinated. He said it was a mere set-up because the project was bothering someone.
Manfrini thinks that a single player made the massive deposit of 285 million UST on Curve Finance and Binance. Then huge shorts on Luna and hundreds of Twitter posts followed it.
However, Do Kwon has underestimated the panic in the market, joking that UST could be out of parity right now.
By Alexander Salazar