1/12 $UST is below $1 and lots of people are panicking, but let's relook at the fundamentals.
What is the relationship between $LUNA and $UST and three reasons why $UST will NOT depeg.
A short thread for a short crisis.🧵👇🏻
$LUNA $UST $ASTRO @terra_money #Terra #Lunatics
What is the relationship between $LUNA and $UST and three reasons why $UST will NOT depeg.
A short thread for a short crisis.🧵👇🏻
$LUNA $UST $ASTRO @terra_money #Terra #Lunatics
3/12 Confidence was shaken and $LUNA tanked causing $UST confidence to further decline.
@jump_ sold some assets to buy up $UST helping to bring $UST back to $1 but as of this writing it's still below peg by under 1%.
So what now?
@jump_ sold some assets to buy up $UST helping to bring $UST back to $1 but as of this writing it's still below peg by under 1%.
So what now?
4/12 When $UST is below $1, because of its algorithmic model, anyone can buy up 1 $UST and convert it into $1 of $LUNA in Terra Station's market swap and sell on a centralized exchange, pocketing risk-free profit.
5/12 But what happens if $LUNA's market cap drops below $UST's market cap? Well, there will initially be a lot of FUD (fear uncertainty doubt) on how $UST is undercollateralized.
But this is important!
$UST is not backed by $LUNA, but rather, the demand of $LUNA.
But this is important!
$UST is not backed by $LUNA, but rather, the demand of $LUNA.
6/12 As long as there are people looking to buy $LUNA, $UST can go back to peg.
And $LUNA is a deflationary apex asset that generates yield based on the activities within the network!
With many exciting protocols and partnerships coming, there'll always be $LUNA buyers.
And $LUNA is a deflationary apex asset that generates yield based on the activities within the network!
With many exciting protocols and partnerships coming, there'll always be $LUNA buyers.
7/12 But will $UST depegged? It's unlikely, at least right now. It is more likely for it go back to $1.
But has $UST depeg before? Yes it did, but we have far more defenses in play this time. Let's explore three of them.
But has $UST depeg before? Yes it did, but we have far more defenses in play this time. Let's explore three of them.
8/12 Firstly, we now have the support of more VCs such as @jump_ and threearrowcapitals and more who bought $LUNA at $50 and they are very likely to protect that floor in order to protect their investments.
A floor in $LUNA means buying pressure, and that protects the peg.
A floor in $LUNA means buying pressure, and that protects the peg.
9/12 We now have protocols like @teamkujira and @whitewhaleterra buffering anchor liquidations and arbing the ust peg so we don't get a cascading crisis scenario.
Unfortunately WW didn't do anything today as they only operate on layer 1s currently, please fix ser @SebastianJer7.
Unfortunately WW didn't do anything today as they only operate on layer 1s currently, please fix ser @SebastianJer7.
10/12 To further boost confidence in $UST, @stablekwon and @lfg_org have purchased billions of $BTC and $AVAX as alternative redemption models.
This means you can take your $UST you buy below $1 and redeem for $BTC near $1, adding some backing to $UST. This was not used today.
This means you can take your $UST you buy below $1 and redeem for $BTC near $1, adding some backing to $UST. This was not used today.
11/12 $UST and $LUNA has survived far worst in 5th of May 2021 and we're far stronger today to deal with $UST depegging crisis, but more work can be done to instill confidence.
Topping up of Anchor reserves this period is one way to bring back confidence to the ecosystem.
Topping up of Anchor reserves this period is one way to bring back confidence to the ecosystem.
12/12 tldr; $1000 $LUNA is not a meme.
But it will be a bumpy ride so don't let the whales steal your $LUNA!
Stake it, forget it, and come back next year to enjoy it!
Wondering how to stake your $LUNA? Read this!
But it will be a bumpy ride so don't let the whales steal your $LUNA!
Stake it, forget it, and come back next year to enjoy it!
Wondering how to stake your $LUNA? Read this!
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