Amid the bloodbath suffered by all of crypto on Monday, one digital asset collapsed hilariously harder than the rest: Terra.
Yes, that includes everything – from the Terra (LUNA) governance token, to its so-called “stablecoin” TerraUSD (UST). The former is down over 75% on the week, while the latter collapsed below $0.7 despite intended $1.00 price peg.
The token’s absolute meltdown has nearly removed it from the top 20 cryptocurrencies, despite being top 10 mere days ago. The ordeal has so thoroughly overshadowed Bitcoin’s price crash that even Treasury Secretary Janet Yellen caught wind of it.
While the situation sounds devastating for Terra holders, it’s fairly amusing from an outsider’s perspective. After all, there’s nothing like the satisfaction of watching one so cocky be so catastrophically wrong about anything.
Do Kwon’s Tweets
I refer to Terra co-founder and face of the project, Do Kwon. While various plebs foresaw the collapse of his Terra stablecoin system, Kwon denied Monday’s fate at every turn.
Check out this tweet from the “master of stablecoin” on Saturday. Kwon denied the constant warnings that UST ran the risk of depegging from the dollar, while also calling the rest of crypto Twitter “poor”.
“If yall girls are gonna fud, try to do it during my waking hours pls,” he continued. Terra chain is 24/7, but I am a new father for cryin out loud.”
That wasn’t all: He later mocked those claiming that a UST depeg catastrophe was imminent, and suggested that they’d be “be waiting until the age of men expires”.
That was the last tweet of that tone before the Luna Foundation Guard elected to deploy its Bitcoin reserves to rescue the falling UST. This was just two days after Kwon denied that the reserve would ever sell Bitcoin to defend the peg.
Kwon went from mocking his followers for predicting a depeg to dismissing them due to his business in stopping it.
While both of Terra’s cryptocurrencies remain underwater right now, Kwon claims he has a plan help recover UST’s peg. However, he has not announced what the plan plan is yet.
Understanding Terra’s Fall
Though pinpointing exact causes can be difficult, Kwon retweeted a Twitter user claiming that UST collapsed due to a coordinated attack. By his account, a whale dumped 9 figure amounts of UST on both Curve and Binance, thus bringing its market value down.
When UST falls, Terra’s UST to LUNA conversion mechanism is designed to let traders arbitrage the discrepancy. This takes UST off the market and theoretically helps restore its peg, but comes at the cost of devaluing LUNA.
As such, LUNA may be entering a debt spiral that Kwon himself predicted of the asset months ago. For this reason, Terra has been trying to change their stablecoin reserve system to incorporate Bitcoin, rather than LUNA.
Source: https://cryptoadventure.com/terras-meltdown-and-the-humbling-of-do-kwon/