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UST rebounds to $0.9 after unpegging, Paradigm researcher Hasu: Stop calling it decentralized

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UST rebounds to $0.9 after unpegging, Paradigm researcher Hasu: Stop calling it decentralized

Despite Terra's official efforts to maintain the stability of the stablecoin UST and implement a new currency policy, UST has once again significantly deviated in the face of market volatility. Terra's founder, Do Kwon, has not yet responded. UST has now rebounded to the $0.9 level. The following is a summary of the data and events.

1. LUNA Plummets, UST Market Cap Surpasses LUNA

According to CoinMarketCap, LUNA, which is used to mint UST, has significantly depreciated, and its market value is now lower than UST.

In addition, the LFG Foundation has transferred all of its Bitcoin reserves used to stabilize UST. According to their policy, the Bitcoin was used to borrow funds, purchase UST at a low price, and maintain its price.

2. Curve UST-3Pool Ratio Severely Imbalanced

Currently, the stablecoin lending protocol Curve's UST-3Pool is in an imbalanced state, with the ratio of UST to 3Crv USDC, USDT, and DAI at about 96:4, and the UST ratio continues to rise.

UST is severely uncoupled from the US dollar, with 1 UST only able to exchange for 0.75 USDC.

2. Binance Suspends LUNA, UST Withdrawals

Binance announced at noon on 5/10 that it is temporarily suspending withdrawals of LUNA and UST tokens due to network congestion issues.

Paradigm's research analyst Hasu previously pointed out that Binance had no buy orders for the UST/USDT trading pair, speculating that it may be to buy time for bidders to regain market liquidity. As of the deadline, trading on the Binance platform is normal, with a price of approximately $0.92.

3. Terra, Anchor Funds Exiting

Terra and Anchor's locked funds decreased by nearly 50% in a single day -48.56% and -49.8%, respectively. Terra had a TVL of $29.65 billion on 5/5, which has now dropped to $11.93 billion; Anchor's TVL is currently $6.55 billion.

Compared to other public chains in USD:

Terra TVL｜defillama

4. 5/5 Network-Wide UST Injected into Anchor, Increased Interest Rates After Price Collapse

On 5/5, Anchor's TVL was approximately $17.15 billion, while UST's market cap was $18.67 billion, meaning almost all circulating UST was used to subsidize Anchor's interest rates:

However, after UST started to decouple, Anchor's UST reserves significantly decreased:

Anchor also raised interest rates to 19-20% to incentivize people to hold UST:

5. THORChain Pauses Terra Network Activities

Cross-chain trading protocol THORChain has suspended trading due to congestion on the Terra chain, with nodes unable to sync 100% with Terra. They emphasize that the interruption in trading is due to technical limitations on decentralized cross-chain infrastructure, as node synchronization could not reach the minimum threshold of 67%, with no physical intervention.

6. Wonderland CFO 0xsifu Buys UST on the Dip

According to Etherscan, the address 0xsifu sifu.eth exchanged 2,813,242 USDT for 3,882,733 UST in two transactions.

After the news was released, UST has rebounded to $0.9.

For controversies related to 0xsifu, see: Wonderland Scandal Summary, Frog Kingdom currencies plummet, MIM unwanted.

Expert Opinion: Hasu

Paradigm's research analyst Hasu pointed out issues with the UST arbitrage mechanism being suspended, leading holders to sell UST below $0.7 on Binance. The community believes this is partly due to the redemption limit of UST/LUNA.

Hasu urged that regardless of the ultimate outcome of UST, it should no longer be described as decentralized, as it has minimal collateral and transparency, controlled by a single entity, and has often been manipulated in public markets, far worse than the Federal Reserve.

The Block Research Director Larry Cermak

Larry Cermak stated that rumors suggest that institutions like Jump and Alameda will invest $2 billion to rescue UST.

However, he believes that even if UST eventually returns to $1, the public's lost trust in UST will be difficult to regain.

SBF: You all know how this will end

FTX founder SBF commented after the crypto market downturn, stating that as always predicted by the outside world, "stablecoins will collapse in market volatility," but not the stablecoins like USDT and USDC as predicted by the outside world. He believes this outcome was "predictable."

He then retweeted a previous interview where he was asked about his views on LUNA and UST, to which he responded:

I think it's cool; algorithmic stablecoins can indeed provide some utility, but from a macro perspective, if you say it's a stablecoin backed by volatile assets, then what happens when the market is volatile? You know what's going to happen.