Terra tries to save Peg UST: conspiracy theories rain down Clone

Terra tries to save Peg UST: conspiracy theories rain down
Source: AdobeStock / Rokas

TerraUSD (UST), an algorithmic stablecoin run by the Terra network and created by South Korea’s Terraform Labs, has once again lost its peg (Peg) to the dollar after a wave of sell-offs that hit the cryptocurrency market .
The stablecoin, which is supposed to hold a $ 1 value by creating and destroying the supply through an exchange with Terra governance and the LUNA token, has dropped as low as $ 0.666831 in the past 24 hours, according to CoinGecko.
UST’s de-anchoring prompted the Moon Foundation Guard (LFG), a nonprofit organization dedicated to maintaining the stability of UST’s Peg, to interfere and lend $ 1.5 billion in Bitcoin and UST to defend the anchor.
The action apparently helped UST recover. At 7:49 UTC, the tenth coin by market cap is trading at $ 0.894706, closest to its dollar Peg.
The price of FSO – 7 days
Source: coingecko.com
UST 7-day price chart. Source: coingecko.com

While the situation is still ongoing, a number of conspiracy theories are floating around the cryptocurrency community, speculating on what may have led to UST losing its Peg to the dollar.
As pointed out by Ran Neuner, co-founder and CEO of Onchain Capital, a blockchain investment fund and advisory service, one speculation is that the attack on UST was coordinated by the large investment firm Citadel.
“This seems highly plausible given their anti-Bitcoin stance,” Neuner argued. “Also, when Terra Do Kwon / LFG CEO advertised that they would protect the peg at some level, it was an invitation to attack. Wall Street is an expert in this ”.
Bitcoin trader Jacob Canfield even expanded the theory that Citadel was the “culprit” of UST’s de-peg. He claimed that the investment firm borrowed a large amount of BTC, exchanged some for UST, and started dumping its BTC and UST after opening a short position.
Others drew parallels between UST’s de-Peg and how Fir Tree Capital Management, a $ 4 billion hedge fund, wanted to short-circuit tether (USDT) earlier this year.
Meanwhile, Larry Cermak, The Block’s director of research and analysis, said Jump Capital, Alameda Ventures and other VC firms could provide an additional $ 2 billion to help save UST.
“Whether this rumor is true or not, it makes perfect sense for it to spread,” Cermak said. “The bigger issue here is that even if they manage to get it to USD 1 by some miracle, the trust is irreversibly gone.”
However, some have noted that another $ 2 billion would not help much either, as UST’s market capitalization exceeds $ 16 billion.
While there are several theories when it comes to how UST may have lost its Peg, there appears to be a form of consensus that the so-called decentralized stablecoin is neither truly decentralized nor stable.
“No matter how it ends, I don’t want people to call UST decentralized again. Even the little collateral support it has is not transparent and one-party controlled, ”said Hasu, a research fellow at cryptocurrency-focused investment firm Paradigm.
Some have noted that decentralized finance (DeFi) in general is more of an experiment at this point, with most projects trying to achieve true decentralization over time.
“I don’t even think Do Kwon thinks it’s fully decentralized right now. But it’s something we’re all building as a goal, ”said one cryptocurrency user.
In the latest update on Monday, the LFG shared that the organization withdrew about 37,000 BTC (1.18 billion) to lend to market makers.
“Very little of the recent withdrawal has been spent, but it is currently being used to buy UST,” the LFG said, noting that this was the latest withdrawal.
Meanwhile, leading cryptocurrency exchange Binance announced today that withdrawals for LUNA and UST tokens have been temporarily suspended due to a high volume of pending withdrawal transactions, caused by the slowness and congestion of the network, they said. Withdrawals will be reopened when the exchange deems the network stable and the volume of pending withdrawals has reduced.

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