“The longer it lasts, the more that it will increase pressure on Bitcoin Ethereum.”
“It’s not as significant as a money-market fund ‘breaking the buck’, but it is adding to this lingering anxiety among crypto investors,” noted Michael Safai, managing partner at crypto trading firm Dexterity Capital. “The peg continues to break down,” Thorn wrote in a note.Īs Terra and other algorithmic stablecoins exploded in popularity over the past year, experts have raised concerns about how the market mechanisms underpinning Terra and its peers could be a risk for the wider crypto space. With TerraUSD’s market capitalization standing at $16.2 billion against Luna’s $11.4 billion, the very premise of the algorithmic stablecoin-that 1 TerraUSD can always be exchanged for $1 of Luna-appears broken. Luna’s publicly disclosed reserves have plunged from $3.2 billion on Friday to $201 million on Tuesday.Īmid the intervention, the price of Luna has crashed, plunging by one-third from around $82 on Friday to $31 by Tuesday. The group also said that it would loan 750 million TerraUSD for the purposes of accumulating more Bitcoin as market conditions normalize.īy late in the day on Monday, the Terra defenders were forced to move 37,000 Bitcoin-around $1.2 billion at current prices-of the group’s 42,000 Bitcoin reserves directly to market markers, according to Alex Thorn, head of research at crypto financial-services group
The foundation said on Monday it would loan $750 million worth of Bitcoin to market makers, or trading firms, that would help to protect the TerraUSD peg and liquidity. Terra founder Do Kwon announced in March that the group would begin accumulating up to $10 billion in Bitcoin to back the stablecoin as reserve, and what they have has been put to use. Luna Foundation Guard, the nonprofit set up to support Terra, has swung into action.
“It remains to be seen whether each project will be robust enough to maintain its peg during these volatile times,” Delphi Dgital, a cryptocurrency research firm, wrote in a report. While asset-backed stablecoins like Tether and USD Coin have held their peg, tokens similar to Terra have floundered, with Neutrino USD trading at 95 cents and Fei USD hovering around 98 cents. But as billions of dollars of Terra was dumped on Saturday, it all came undone, and other algorithmic stablecoins have also felt the pinch.
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