When the USTstablecoin of the Terra ecosystem over the weekend, LUNA also slid frantically, losing about 95% of its value.
Efforts to rescue UST continue as LFG – the entity that acts as the settlement protocol – has drained all bitcoins from its treasury. Now rumors are circulating that the organization wants to raise $1 billion to support its freefall project.
But what about the multi-million dollar bet Do Kwon recently made?
LUNA, which depends on TerraUSD, dived from $87 to press price of $4.5 in less than a week. This might not be the best time to recall the bet placed by outspoken Terraforms Labs founder Do Kwon.
Almost two months ago, Kwon agreed to a $1 million bet against a community member – “Sensei Algod” – whether the price of LUNA would be higher in a year, that is – over $88. The founder later said yes to another bet made by pseudonymous crypto trader “GCR,” only this time the stakes were 10x higher. Soon after, Kwon transferred $10 million worth of stablecoins to be held in escrow pending the outcome of the bet.
After the recent turn of events, Sensei Algod said that even if the bond is restored, trust will still be lost while wondering if LUNA will ever recover from the crash. GCR, on the other hand, had proposed $50M and $20M bets shortly after the initial one, but Kwon didn’t respond. Now the user has updated the original bet and shorted LUNA for $10 million.
Cryptocurrency researcher Hasu, who previously warned that undercollateralized stablecoins “can’t work,” said that as a stablecoin issuer, the moral choice will be to defend UST by holding the treasury, even if it means LUNA goes to zero.
Despite the current bearish outlook, many believe LUNA will bounce back. One of them is CNBC’s Crypto Trader host Ran Neuner, who tweeted:
“Each attack makes LUNA more resilient. This has happened to BITCOIN many times in the early days. It’s part of the process!”
While the algorithmic stablecoin has gained considerable momentum, it has also managed to attract the attention of critics. Many in the latter cohort believe the problems with assets like UST are obvious.
There are two reasons in the first place – it is not covered by a reserve, and specialized algorithms cannot always guarantee that the market will work. Last year, billionaire Dallas Mavericks owner and investor in ABC’s “Shark Tank,” Mark Cuban, said he lost money when algorithmic stablecoin IRON was de-pegged from the US dollar following a major sell-off by major investors. However, Kwon is undeterred by these tales.
Recent market conditions have put immense pressure on the TerraUSD peg. And what many feared finally turned out. Not one, but two major de-pegging events.
Critics noted that Terra’s contingency measures could add to the current selling pressure in the market and push the price further down. However, Kwon shared the tweet from Delphi Ventures founding partner Jose Macedo, which said, “LFG has made UST more robust but also temporarily more centralized.”
Source: Crypto News Deutsch