UST/LUNA Collapse Talk of The Crypto Space
The past week saw the crypto world focus more on the UST/LUNA (Terra) debacle in which one of the largest stablecoins dropped over 70% from its parity with USD
The price of UST is currently at $0.095473 as of this publication with LUNA having plummeted to $.0001488.
In other words, the $1M and $10M bets Kwon took back on March 14 aren’t looking like such a hot play at the moment as LUNA would need to mount a Herculean effort to vault past its $88 by March 23, 2022, for the Terraform Labs CEO to walk away a winner. |
And with the way the aftermath is currently playing out with reports of pending lawsuits surfacing, it appears he will likely need that money.
The algorithmic stablecoin project crashed and the monumental de-pegging dominated crypto headlines on Tuesday, May 10 as UST dropped to as low as $0.1331 despite its main backer, the Luna Foundation Guard (LFG) nearly depleting its BTC reserves in a futile attempt to rescue the peg.
The fact that the slide came up (coincidentally) on the day that the US Federal Reserve published its “financial stability report” warning about stablecoins also brought an interesting twist.
The aftermath effect was somewhat unprecedented. The ripple effect saw traders remove assets from the UST/LUNA ecosystem as the LUNA daily active address surged 720% from 198 on May 8 to 1,623 on May 11 and the LUNA on-chain transfer spiked by 450%.
The de-pegged UST saw holders bolting for the exit as active address soared by 259%, and transfer volume +226%.
Terra investors bolting for the door
The massive bank run was further exacerbated by the stoppage of the Terra chain as well as trading services for both LUNA and UST from Binance and Crypto.com with the latter citing a pricing bug for the LUNA trading suspension.
The collapse has since triggered some chain events with implications across the industry as a whole, primarily a massive market wipe-out that also generated doubts from naysayers over the stability of the market.
From Blizz Finance, a lending protocol on Avalanche, and crypto lending business Celsius pulling out at least half a billion dollars in Anchor Protocol over a 24-hour period to Venus Protocol losing $11.2 million as Chainlink suspended LUNA price updates and the LUNA lending market, several losses were incurred by interconnected projects.
The Osmosis blockchain proposed an emergency hard fork to shift incentives from UST and LUNA pairs on its DEX and a planned Terra Dapp Expo — slated for June 9 and 10 in Austin, Texas got canceled.
On the institutional side, Pantera Capital appears to be one of the few to walk away unscathed, having already pulled out an estimated 80% of its total LUNA holdings.
In fact, the VC successfully generated a 100X ROI on its initial $1.7M investment according to a statement by Pantera Capital partner Paul Veradittakit.
On the regulatory front, the U.K. government stated that it is set to take action on stablecoins following the collapse while the European Union Commission says it will soon order issuers of any stablecoin exceeding 200 million euros (or $211 million) and registers over a million transactions daily to cease issuances until the figures come back below the threshold.
On a personal note, Do Kwon, the Terra founder, notes in a tweet that neither he nor any institutions that he is affiliated with profited in any way from the UST/Luna incident as he sold no asset during the crisis.
With an angry mob of investors out in full force, Kwon’s wife actually had to call the police for emergency personal protection after a stranger barged into their Seoul apartment as angry investors demand her husband’s arrest.
A poll is currently being conducted with a proposed fork receiving significant backlash from the wider community due primarily to the proposed tokenomics.
As of this publication, the voting currently stands at 77.15% in favor of the fork.
If successful, the fork will lead to a split with the previous chain being renamed Terra Classic and the newly forked chain carrying on the original Terra namesake.
In case you’re wondering, this would be an identical mirror of the Ethereum fork back in 2016 which led to Ethereum and Ethereum Classic.
It’s Also About Bitcoin Price and Mining
Bitcoin dropped to as low as $25,000 on Thursday, May 12, dragging mining profitability to its lowest levels since December 2020.
It comes as Bitcoin’s difficulty level hit another all-time high to reach 4.89% to 31.25 T, marking the second-highest adjustment following a 5.56% increase on April 27. At the same time, Bitcoin’s mempool has been filling up.
Transaction fees have risen to July 2021 levels which were recorded shortly after China banned crypto mining.
On the topic of Bitcoin mining, legislators in Norway rejected a bill that could have seen proof of work mining banned in a country well-known as a leading hub for crypto mining in Europe.
Nigeria Issues Digital Assets Rules
Nigeria’s financial regulator, the Securities and Exchange Commission (SEC), has published rules it says “shall apply to all issuers seeking to raise capital through digital asset offerings.”
Nigeria is one of the top countries with the highest level of crypto engagement. Crypto platforms have mainly viewed the framework as a significant breakthrough in delivering much-needed clarity and protection for crypto customers and businesses and a huge opportunity for closer collaboration between industry and regulators.
This is due in particular to the fact that the published rules represent a major shift in the country’s approach to the crypto industry following the central bank’s statement in a February 2021 circular that crypto exchanges in Nigeria had been banned from working with financial institutions.
The regulator classifies digital assets as securities that fall within the SEC’s oversight.
Chelsea FC in First Digital Asset Partnership
One of the world’s top football clubs, Chelsea FC, has partnered with a leading digital asset platform, Amber Group, in its first engagement with a digital asset entity for an official sleeve sponsor.
Amber Group will use the deal to introduce WhaleFin — its flagship digital asset platform — to football fans around the world, through a display of the platform’s logo on the kit of both the men’s and women’s Chelsea FC teams starting from the 2022/23 season.
Amber Group will seek exposure for its all-in-one WhaleFin platform as a gateway to crypto finance for everyone including those in both institutional and retail digital asset markets.
The plan is to bring companies and brands into crypto-finance by providing full services ranging from investing to financing and trading for institutions, individuals, and creators to unlock the full potential of digital assets in an increasingly decentralized environment.
While it signals the growing prominence of digital assets and the role it plays in helping investors build wealth in the digital era, the partnership is not the first move by a football club in the digital asset space.
Other clubs that have had some form of partnership with a crypto project include West Ham, a LaLiga Santander football club, Real Sociedad, and France’s Paris St. Germain (PSG).
Central African Republic Becomes Second Country to Recognize Bitcoin as Legal Currency
The second country to adopt Bitcoin as a legal currency has emerged.
The Central African Republic (CAR) is toeing the line of El Salvador to make the top cryptocurrency its legal tender while also legalizing the use of cryptocurrencies in general.
The country’s parliament unanimously adopted a bill at the end of April that made them the first country in Africa to adopt Bitcoin. CAR’s adoption of Bitcoin as legal tender presents a series of challenges for the country and the region, the International Monetary Fund said.
Meanwhile, Central Africa’s regional banking regulator issued a reminder to all member countries (including CAR) about the bloc’s ban on cryptocurrencies.
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