Nearly 5 billion US dollars evaporated in 2 hours, while the Luna crash was in progress

Original author: 0x137, Rhythm BlockBeats

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The phrase "everyone is looking forward to the end" could not be more appropriate to describe the market sentiment since 2022. Because the CPI index was overheated, the market was full of calls for interest rate hikes at the beginning of the year, 25 points, 50 points, 75 points...

Now the interest rate hike is here, the market has collapsed, and people have ushered in the end they have been calling for for a long time. Open the financial page, the headline is "Global stock markets have experienced the worst day in recent years", and the VIX panic index has reached an all-time high since the outbreak of the new crown.

In this kind of global crash, "the Correlation of One" often occurs. When large-scale positions are exposed, people have to sell their other assets to fill The hole caused the prices of all assets to plummet.

This kind of "panic smashing" also affected the currency circle, and both Bitcoin and Ethereum fell to varying degrees. Under the attack of panic and capital siege, Luna has become the worst "victim" of the current encryption market.

At 8 o'clock this morning, due to the price drop of Luna, which led to large-scale liquidation, Luna triggered the death spiral of "everyone's expectations". So far, the price of Luna has fallen to around $29, UST has dropped to around $0.6, and the Luna Ponzi collapsed again.

This death spiral is the most serious in the "History of UST Unanchor". "Luna Ponzi" is only a hardcore player in the currency circle The topic we just discussed was even trending on Weibo today.

What happened? Let's run through the process from the wee hours of last Sunday.

On the evening of May 8th, the giant whale warning account on Twitter began to "alarm" frantically, with a message of selling UST every hour, and The transaction amount is in the millions.

At this time, due to selling pressure, UST has already experienced a certain degree of unanchoring, and the liquidity of the UST-3Crv pool has also begun to tilt, but LFG quickly stepped forward to fight the fire and prevented the situation from further developing. deterioration.

After reading this, you may be curious, isn’t the market value of UST 17 billion? How can such a small-level sell-off pose a threat to anchoring?

That’s right, UST is currently the largest algorithmic stablecoin, theoretically speaking, it should have the ability to resist strong selling pressure. But there is also a protocol strongly associated with UST: Anchor Protocol.

Sure enough, I was shocked when I checked. As of May 5, Anchor TVL rose to $18 billion, accounting for almost all of UST's market capitalization. In other words, almost all USTs on the market exist in Anchor to earn 20% APY!

Because of the poor market performance, both giant whales and retail investors have all hid in the stablecoin harbor, and because of the stable and extremely high APY interest rate, they exchanged assets for UST and deposited them in Anchor became the most popular choice among people.

For UST and Anchor, this is proof of a successful marketing approach, but it has also become a grave that LFG dug for itself. Previously, Rhythm reported in that the stable currency interest rate has been as high as 20% for a long time. Is Anchor also a Ponzi? " introduced in detail the huge troubles that high APY and high TVL have brought to Anchor savings and UST anchoring. What's more, many people also like Loop operations to increase their UST leverage and save Anchor A big hole was burned.

In order to prevent UST from being unanchored, LFG must ensure that the 18 billion UST locked in Anchor will not escape in large numbers, because there are almost no USTs on the market now fluidity. But we do know that some clever whales spotted the problem last Sunday and started a "collective migration".

The small anchor break that occurred on May 8 was extremely negative for market sentiment, especially for Luna and UST holders. Starting from May 9th, a large amount of funds began to flee Anchor, which caused great pressure on the UST anchor. Seeing that the situation was not good, LFG immediately carried out a series of radical remedial measures. The following is the compilation of rhythm tracking reports:

May 9th 13:02——Lending BTC to protect the UST anchor

LFG announced that it will lend 750 million US dollars of BTC to the OTC trading platform to ensure that UST is pegged to the US dollar. As the market normalizes, LFG will lend (Loan) 750 million UST to buy BTC.

May 09th 14:01 - Claims no plans to cut Bitcoin position

LFG decided to deploy USD 1.5 billion in BTC/UST liquidity (USD 750 million for BTC and USD 750 million for UST) in order to ease market tension around UST worry. And declared that he would not liquidate his BTC positions.

May 10th 08:11——28205 BTC worth 840 million USD were transferred to LFG address

In the early morning of this morning, all bitcoins under the LFG transfer address were about 42,530.8, worth 1.27 billion US dollars. Then 28,205.5 bitcoins were transferred in. As of the post, the address held a total of 28,205.5 bitcoins, worth about 840 million US dollars.

Under various remedies, the anchoring situation of UST was stabilized on May 9, but the panic in the encryption market is still spreading. Yesterday, the whole market was bloody, which made it even worse for Luna. According to DeFi Alpha statistics, Luna will start the first large-scale liquidation around $42, followed by $35, $33, $29...

At 7:00 this morning, Luna fell below $42 and triggered liquidation, and UST immediately fell off the cliff. Half an hour later, Luna fell below $35 to trigger a second liquidation, and UST broke through the previous low of $0.85. Currently, the price of Luna has fallen to $29, which is about to trigger a larger liquidation, and the loan value is now in the hundreds of millions of dollars.

The plunge of Luna and the severe de-anchor of UST have brought an almost "destructive" blow to Terra's ecology. The TVL of several top agreements have also been "halved".

According to Coin Marketcap data, UST’s market value evaporated nearly $4 billion in just a few hours this morning, and has now fallen to about $14 billion.

As UST's largest "undertaker", Anchor has only 7 billion US dollars in deposits, which means that there are still 7 billion US dollars of UST "displaced" outside, which may be sold at any time . In order to absorb the UST circulating in the market, Anchor's APY was once again rarely raised to more than 20%.

Rhythm in the previous The magic of algorithmic stable currency Quitting Dreams: After LUNA, there will be no next UST" and "Conversation with Do Kwon, founder of Luna: UST’s Bitcoin Gambling” The second article explains the endorsement dilemma of UST and the entire stablecoin market, as well as UST’s own coping strategies.

Actually, this UST severe de-anchor is not the first time that Luna has triggered a death spiral. On 5.19 last year, UST also suffered a serious de-anchor, and the price fell to 0.85 In the end, under the rescue of LFG, Luna and UST were able to survive and develop. Since then, LFG has made a series of changes in order to prevent similar incidents from happening again, including the new endorsement mechanism of UST.

In fact, buying native tokens of BTC and other L1 public chains as endorsement is not a wrong choice, but to realize the complete delivery of this new mechanism, it is necessary to It takes a while. It's a pity that the market didn't leave enough opportunities for the Luna maniac Do Kown to redeem himself. The collapse of Luna this time was lost to time.

Now, what choice will LFG make? Can UST regain confidence? We will wait and see.

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