Why is LUNA tanking? 5.08.22
Overview
Terra LUNA/UST suspicious fiasco
Some positives from a capitulating market
Juno’s $34m blunder
NFTs on Instagram
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Suspicious activity concerning the UST peg puts LUNA price under further pressure.
LUNA's algorithmic stablecoin UST is the largest truly decentralized stablecoin in crypto, but questions have arisen regarding its sustainability. This weekend, UST was put under a significant test, a suspicious one.
Blockchain security researcher and Polygon CISO Mudit Gupta researched the fiasco and disclosed his findings in the following Tweet.
A malicious player discovered when Terraform Labs (TFL) would be removing $100m of UST liquidity from Curve. The large sum of UST is to be used to deploy into 4pool, the newly created liquidity pool in Curve containing UST, FRAX, USDT, and USD. Removing a large sum of UST, put the peg to the test and dropped it below the 1.00 mark. Meanwhile, the malicious player purchased UST in large sums while it sat below its peg, profiting.
Suspiciously, the malicious player knew precisely when the price depeg would occur, raised questions about the gamification of the process, and opened another trust issue in the Terra ecosystem concerning UST. Was it an LFG member? An exploiter? Or a chaos-creating competitor?
The suspension didn't help a struggling Luna price as it fell another 25% after $2b worth of UST was removed from Anchor over the weekend. To make this worse, newly emerging competition in the forms of Tron’s USDD and Near Protocol’s USN are additionally putting strain on Terra and the LUNA/UST pairing as the two networks open the creative doors to onboarding liquidity.
Market update 🌍
The uptrend failed to hold in as BTC's price experienced its worst week since January, falling by -11.52% to $33,700. There's been six straight weeks of red candles, something that hasn't occurred since late 2018, when bitcoin found a $3151 bottom after a year of downtrending. The bitcoin fear and greed index points towards a capitulation in traders after hitting 11 and entering extreme fear. On a good note, there's been a jump in bitcoin google searches but nothing significant to claim any substantial changes, just an aspect to keep an eye on.
Additionally, the Fed continues its treacherous path of fighting inflation at the expense of markets.
Source: Trading View
One chart holding up remarkably well is the ETH/BTC chart. Although the price dumps on ETH and BTC, ETH is holding up relatively better than its golden counterpart. Can the recent uptick in ETH/BTC maintain its upward trajectory to mimic a year-old pattern?
Newswatch 📰
Juno copy/paste blunder. $36M in seized Cosmo-based JUNO tokens were mistakenly sent to an unknown address with no access after the community voted on capturing the tokens from Takumi Asano, an early investor, who maliciously gamed the initial token drop.
On-chain ⛓
Matic algo-stablecoin. Polygon (MATIC) has released MALT, an algorithmic stablecoin on the Polygon network.
Bancor 3. Bancor set to launch Bancor 3 on May 11, 2022.
Tidbits:
FXS on 4pool opinion.
Beethoven + Balancer on Optimism (OP).
dYdX V4 to launch in two days.
NFT & metaverse update 🐵
NFTs on Instagram. Social media platform Instagram, owned by Meta, reveals plans to support NFT from various networks, including Ethereum, Polygon, Solana, and Flow, and will not charge for the service.
Curry shot NFTs. Stephen Curry's sponsor, Under Armour, plans to release NFTs to celebrate every three-pointer Curry drains during the ongoing playoffs on a first-come, first-serve basis.
Notable Mints:
Writer’s take
Competition can be ruthless when it comes to money, and crypto is no exception. The players create solutions to steal users and liquidity from the front and utilize notorious tactics to test the limits of competing protocols in the backend; although unconfirmed, such appears to be the case with Terra's latest fiasco.
There are some benefits to the adverse circumstances. Exploits allow teams to spot weaknesses. Then it's up to them to adapt and grow by improving the matter, whether through code or methodologies. To find the weak spots and quickly build the next iteration. The results help create incredibly resilient protocols. Like in nature, organisms get tested in the wild, and the strongest emerge as survivors while the lesser get outperformed and ultimately go extinct.
So will Terra be a survivor and maintain its premier status, or will it succumb to underlying pressures? Only time and the resilience of the Terra team will tell.