Financial Times – Crypto News

Good news everyone!

Shortly before announcing a recovery plan for $UST. Keep doing.

– Mach Kwon 🌕 (@stablekwon) May 10, 2022

His plan is to rescue Terra, the algorithmic stablecoin, which unpegged on Monday and has been burning billions in VC capital ever since.

So far the plan has failed spectacularly:

Here’s what happened overnight. The Luna Foundation Council, Terra’s central bank, tried to defend the peg by lending rather than liquidating its recently acquired bitcoin reserves, while for some reason also committed to buying bitcoin with staked native Terra coins:

4/ As a result, the LFG Council decided to carry out the following:

– Lend $750 million worth of BTC to OTC trading firms to help protect the UST peg.

– Borrow 750M UST to accumulate BTC when market conditions normalize.

— LFG | Luna Foundation Guard (@LFG_org) May 9, 2022

It was reported that the Terra Grand Council also tapped crypto investors overnight in hopes of raising another $1 billion. The defense funding package reportedly included the issuance of Luna, the protocol’s governance token with seesaw stabilization mechanism, at a 50 percent discount.

The details I’ve heard but may not be definitive are:

– Jump, Celsius and Jane St. have already confirmed, but Alameda has not yet
– Aim for an increase of $1 billion to $1.5 billion
– 50% discount on LUNA spot with 1 year lock + monthly linear vest over 1 year
~$700M in total commitments as of tomorrow https://t.co/BtqJrF0eqM

— Larry Cermak (@lawmaster) May 10, 2022

Perhaps unsurprisingly, a proposal to raise bailout funds by effectively shorting its own stablecoin matrix hasn’t helped restore investor confidence. At Pixel, UST’s $5.5 billion market cap is backed by Luna’s market cap of less than $1.9 billion.

With the bottom gone, traders (self-identifying as lunatics) have abandoned the Luna-UST swap stabilization mechanism and are instead rushing to the exits. Calm appeals have had little effect:

Always close…stay strong, lunatics

– Mach Kwon 🌕 (@stablekwon) May 10, 2022

And when the sun sets on Luna-Terra’s grand money magic experiment, there will be plenty of opportunities for “I told you so.” To start us off, here is a good post from crypto promoter Richard Heart that gets straight to the point:

Why am I always so right? #UST #LUNA https://t.co/6sKraNDBqY

— Richard Heart (@RichardHeartWin) May 9, 2022