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Terra Event Recap: UST rebounds, LUNA continues to decline; US Congressman says: Market needs failures to understand what can run effectively

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Terra Event Recap: UST rebounds, LUNA continues to decline; US Congressman says: Market needs failures to understand what can run effectively

After the crash of UST and LUNA, many LUNA investors and KOLs who had strongly supported the Terra ecosystem continue to lament on Crypto Twitter. Terra's official account on Reddit has even pinned various national hotlines, urging to invest only with spare money and highlighting the possibility of long-term profitability. Here is a summary of the aftermath of the Terra incident.

Token Prices

Since 5/6, the performance of protocols related to Terra and some of the Cosmos ecosystem affected by the UST collapse are as follows:

  • Terra LUNA: 99.62%
  • TerraUSD UST: 49.79%
  • Anchor Protocol ANC: 90.26%
  • Ecosystem AMM Astroport ASTRO: 54.37%
  • Lending protocol Mars Protocol MARS: 45.74%
  • On-chain synthetic asset protocol Mirror Protocol MIR: 74.53%

The main character UST started to rise after its founder Do Kwon made a statement yesterday, breaking through the $0.7 level, and dropped to around $0.5 before the deadline; while LUNA also saw a significant rebound from 0.69 to 7.78｜1,027% at the time, but continued to decline thereafter, reaching $0.27 before the deadline.

According to Terra Analytics, approximately 152 million LUNA is still staked, with unlocks requiring a 21-day waiting period.

Was Do Kwon involved in developing Basis Cash?

According to Hyungsuk Kang, a former engineer at Terraform Labs TFL, including Kang himself, Do Kwon was one of the developers behind the failed stablecoin project Basis Cash.

An anonymous Basis Cash developer and Kang both claimed that Do Kwon, under the pseudonym Rick Sanchez, was a co-founder and was very interested in the early ideas of Basis Cash, carefully selecting TFL employees and transplanting the ideas to UST.

Kwon proposed the core concept of Basis Cash and its underlying token model, and chose to establish the project in South Korea to avoid U.S. regulations.

Kang also shared CoinDesk's news on Twitter:

Basis Cash was launched in August 2020, while TerraUSD UST made its first appearance in September of the same year.

Speculations on UST Attacker

CNBC Crypto Trader host Ran NeuNer and some members of the crypto community speculated that Blackrock and Citadel, two giant traditional financial institutions, attempted to crash UST by investing in Circle, the issuer of USDC, and borrowed 100,000 BTC from the Gemini exchange to launch the attack.

Source of the rumor

Ran NeuNer later tweeted that entering LUNA at the moment was the best risk-reward trade he had seen in the long term.

His actions were viewed by the crypto community as an attempt to save his large and rapidly evaporating LUNA holdings and urged him to actually enter trades to prove to his followers. In addition, crypto detective ZachXBT has revealed multiple times NeuNer's sale of poor quality token holdings from private sales to followers using his influence.

In response to the cloud of suspicion surrounding the UST attack, one of the main characters, Gemini exchange, immediately clarified that there was no 100,000 BTC loan. BlackRock and Citadel also emphasized in a Bloomberg article that they do not trade stablecoins, including UST.

Exchanges' Responses to UST, LUNA

Binance announced the delisting of LUNA coin-margined perpetual contracts on 5/12, and subsequently reduced the leverage margin for LUNA U-margined contracts from up to 50x to a maximum of 25x and 8x.

Coinone has suspended trading of LUNA and Terra KRT and is considering delisting.

Korbit and Bithumb issued investment warnings for volatility exceeding 50%, with the former suspending LUNA's asset deposit and withdrawal services for wallet maintenance.

Senator: Failure Should Be an Option

Senator Pat Toomey of the Senate Banking Committee, in an interview, stated that algorithmic stablecoins like UST do not pose the same risks to the financial system as asset-backed stablecoins.

Pat Toomey had introduced legislation last month regarding regulation of non-algorithmic stablecoins and pointed out that after the UST incident, it is reasonable to refocus attention on asset-backed stablecoins. He said:

Also, by the way, failure should be an option, and in this space, some failures may be necessary to help the market figure out what can effectively operate.

0xSifu's Long and Short Profits

According to PeckShield data, Michael Patryn, the CFO of Wonderland and co-founder of the bankrupt exchange QuadrigaCX, entered with $2.8 million when UST dropped to $0.72 on 5/10, and sold for $3.56 million when UST recovered to $0.9, making a total profit of about $750,000, and transferred the assets to Avalanche.