Due to the incident, the algorithmic stablecoin of the Terra ecosystem briefly lost its peg to the US dollar.
At the moment on May 8, the asset was trading near $0.98, according to CoinGecko.
In March, the Anchor community was taken decision, according to which the rate on deposits can change by a maximum of 1.5%, depending on the volume of the yield reserve (yield reserve).
According to SmartStakeover the past month, the volume of project reserves decreased by almost 44%, to 180.45 UST.
Before that, we have already observed similar incidents with Anchor – in February 2022, the protocol reserve was almost completely depleted. To prevent collapse, the non-profit organization Luna Foundation Guard (LFG) handed over to the project 450 million UST.
But now there has been no capital injection. In early May, the interest rate on deposits at Anchor for the first time has been reduced before 18%. Now its value is even lower – 17.87%.
Given this fact, users massively withdraw assets from the protocol. On May 7, Anchor’s deposits exceeded 14 billion UST – at the time of writing, the figure is 11.77 billion UST (-16%).
According to decentralized exchange Curve Finance, on May 7 “someone started selling en masse” UST, causing the stablecoin to briefly lose its peg to the US dollar. The developers noted that these actions “faced a lot of resistance” in the form of counter sales of ETH and stETH.
News of Curve Wars 🌈⚔️
Yesterday, someone started selling UST en masse, so it started to depeg. However, that was met with a great resistance, so the peg was restored. To get enough USD for that, a lot of ETH and stETH were sold also.
Aftermath? High Curve trading vol (>uni3) pic.twitter.com/ZChdZiVzcK
— Curve Finance (@CurveFinance) May 8, 2022
For example, the purchase of UST was announced by Tron founder Justin Sun, who called the move his “secret plan”. According to Etherscanhe purchased about 1 million UST using USD Coin (USDC) to buy.
I am buying #UST. 👀
— HE Justin Sun 🅣🌞🇬🇩 (@justinsuntron) May 8, 2022
Some felt that the loss of UST’s peg to the US dollar could lead to the liquidation of some of the fund’s assets. For example, this was stated by the head of the trading company Thanefield Capital under the nickname resonancethis.