Terra’s UST has lost its peg and is trading much below the dollar. This has also resulted in Luna losing over 50% of its value in 24 hours. While we all might believe this has got to do with the algorithm of the stablecoin, there are some other questions as well. Polygon’s CISO Mudit Gupta highlighted that just before the UST dump, Terra removed $150M of liquidity from Curve, and $84 million in UST was bridged to ETH. Terra’s CEO, Do Kwon, was suspected of this $84M dump as the timings, according to Mudit, look ‘sus.’
Terra’s CEO defends himself
Just after Mudit pointed out the fishy things that occurred just before the UST dump, Terra’s CEO wrote on Twitter, “84M dump, not us.” He has also asked Mudit to let him know if he finds out who dumped UST.
– We removed 150M UST from Curve to get ready to deploy into 4pool next week
– 84M dump not us – lmk if you find out who
– After the imbalances started to happen, we removed 100M UST to lessen the imbalance
Obv TFL has no incentive to depeg UST
— Do Kwon 🌕 (@stablekwon) May 8, 2022
Do Kwon says that removing the $100 million in UST was to reduce the imbalance, and they plan to add it to another liquidity pool the following week. To a degree, it does make sense that Terra’s CEO or team could have very less incentive to depeg their own stablecoin project. Not only will it take away any trust from the project, and Luna, which was doing well, also dumped 50% in a day. It was the only coin that was holding its ground even in this bear market.
Users are suspecting UST
A user pointed out on Twitter that if you panic on a token that pegs with USD and gives a 20% fixed return, then panic early. Now, if you think about it, it does seem very high. The Anchor protocol that offered such higher returns to users who deposited their UST saw massive withdrawals over the weekend. Their total deposits fell by $3 billion from $14B.
If you're going to panic on a token promising you parity with the USD and a bank paying you 20% p.a. to deposit your token; panic early.
— The_Stoic_ (@stoitz) May 9, 2022
This was also one of the main reasons why UST lost its peg. Even though it’s in the top 10 coins now, the adoption hasn’t been that much, and the volume isn’t that high as well. Let’s see if Terra’s team is able to fix this and bring back the stablecoin peg. However, they also need to figure out the exact reasons for this and ensure that it doesn’t happen in the future.
Were you holding UST for the high fixed returns that Anchor protocol offered? And what are your thoughts as Terra’s CEO is suspected of the $84M dump? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.