34 ms·

UST Stablecoin Loses Dollar Peg

655 points by lxm 4y ago

TedShiller 4y ago
That means it’s not really stable right? Should be renamed to Unstablecoin
Proven 4y ago
TrapLord_Rhodo 4y ago
Eh, it will repeg eventually now that they are making it centralized like Dia and Tether. They can artificially inflate it up some non-zero amount backing the stablecoin and it will go back to 1. Pretty good arb opportunity if you have the stomach. Do Kwon: "By my hand, Dai will die" Do Kwon two months later: "i will become Dai"
gruez 4y ago
Note this is UST (TerraUSD), not USDT (Tether) the stablecoin controlled by Bitfinex.
- arebop 4y ago
  USDT has about $84 billion market cap, USDC has about $49 billion, UST had about $18.7 billion, as of 7 May [https://cryptonews.com/exclusives/usdt-vs-usdc-vs-ust-how-do-they-compare.htm https://cryptonews.com/exclusives/usdt-vs-usdc-vs-ust-how-do...].
- flockonus 4y ago
  good clarifying point, the 2nd one never had a peg? argument: https://www.youtube.com/watch?v=dAQP3cPUNtA https://www.youtube.com/watch?v=dAQP3cPUNtA
  - javert 4y ago
    It has a peg. All that means is that they're targeting a particular exchange rate and managing to maintain it. The allegation is that it's not fully backed.
    - chii 4y ago
      > managing to maintain it. The allegation is that it's not fully backed. Which means if there's a run on the currency, those backing assets might not actually be able to be liquidated at a price that can back the withdrawals. Aka, the peg is only good if there's no run on the currency - allegedly anyway. I personally wouldn't trust it.
      - rtkwe 4y ago
        Ah you see they don't actually have any obligation to cash out USDT to USD at all if it would cause them issues. It's right in the contract. For all the talk of fiat and money printers it's crazy how central USDT is to the crypto markets. I suppose people are willing to overlook a lot to avoid tax exposures... [0] https://tether.to/en/legal/#:~:text=Tether%20reserves%20the,in%20the%20Reserves https://tether.to/en/legal/#:~:text=Tether%20reserves%20the,....
        gruez 4y ago
        >I suppose people are willing to overlook a lot to avoid tax exposures... I don't see how that's the case? Doing any sort of trade is a taxable event. The tax is due in the year that the trade was made, not when it hits your bank account.
- rtkwe 4y ago
  I'm continually surprised USDT doesn't unpeg. Going from "100% backed" by USD reserves as questionable as that was to being backed by a mix of crypto holdings (who's price is heavily affected if USDT is pumping money into crypto) and commercial paper really didn't seem to have any affect on it's use. For all the winging about money printing and crypto not being printed USDT is seemingly a huge money printer forming a pretty central part of the crypto economy.
  - derac 4y ago
    it just did lol
  - xvector 4y ago
    Everyone knows USDT is a problem. The issue is that exchanges refuse to stop accepting it.
    - 0des 4y ago
      I also fully believe Bitfinex is likely to be manipulating USDT. It is the only way it makes sense. But check this out, here's why you should not wish too hard on its failure: It is too big to fail because a lot of BTC would lose value over night, the entire plug would be pulled out of the industry due to the loss of confidence. Predatory and uninformed legislation would happen while the price and negotiating power is low, and in this time, that is when you really see the blood hit the floor with regard to scams, theft, crime, etc. Regardless of your position on USDT, you should pray this never happens. Edit: For the critics of cryptocurrencies responding below, allow me to make this response -- I didn't have anything to do with subprime mortgages, along with most of USA, however we all paid dearly for that mistake. As the comingling of cryptocurrency and traditional markets become increasingly intertwined, what makes you think that the ancillary effects of a crypto crash wouldn't effect you in some way?
      - tekstar 4y ago
        Sorry where's the downside? That all sounds pretty good, especially for the environment.
vmception 4y ago
Permission to fail, granted Which is what I like most about that ecosystem, just do it, accept the consequences, rapidly iterate to something more resilient
- aaronbrethorst 4y ago
  Like the US dollar, perhaps?
  - VWWHFSfQ 4y ago
    > Like the US dollar We're going on 10+ years of failed cryptoscams now and people on the internet are still saying goofy stuff like this as if it has any meaning whatsoever in the real world or are in any way similar.
    - AnimalMuppet 4y ago
      I think you may have misread the GP. I think the point may have been that the US dollar was the "something more resilient".
      - deleted 4y ago
        [deleted]
      - vmception 4y ago
        if GP is referring to me, I wasn't making that point, I was mostly thinking about how ideation in the crypto space rapidly evolves because people are willing to try, all levels of the stack improve, consumers and investors rapidly become more discerning. lifecycles that are decades long in other markets play out in months or weeks in the crypto space.
        AnimalMuppet 4y ago
        No, "GP" referred to the grandparent of my post, which was aaronbrethorst.
frgtpsswrdlame 4y ago
You know we had 2008 and we learned that in high finance there were these complex derivatives that a lot of people understood in a loose sense, but rarely in a detailed sense. And that they were basing those complex instruments on credit ratings that were essentially fraudulent. And that structure of a fraudulent base and mounds of complexity on top can surf for a really long time before blowing up catastrophically. How is this not just the exact same formula? "Oh you see it's stable because there's this exchange mechanism and it's attached to this floating currency, blah blah blah." It all sounds very complex but then it breaks and you look underneath and it seems like anyone who understood what the mechanics actually were would've always been a little sketched out by it. Is this whole ecosystem not just small-time hobbyists and programmers trying to create this exact dangerous dynamic over and over?
- gruez 4y ago
  >How is this not just the exact same formula? Is it? Specifically, what's the equivalent of "credit ratings that were essentially fraudulent"? If you read the smart contract code, misunderstood how it worked, proceeded to invest anyways, and then it blew up, that sounds like something that's on you. If you invested in some opaque financial product (I don't think MBS buyers can go through each mortgage with a fine toothed comb) and the independent third party that's supposed to be evaluating it was actually biased, that's at least partially on the seller and/or third party.
  - ShamelessC 4y ago
    > If you read the smart contract code, misunderstood how it worked, proceeded to invest anyways, and then it blew up, that sounds like something that's on you. Not a software engineer or information security professional I gather...
  - majormajor 4y ago
    So would you propose an independent third part to evaluate all these various things, and see which ones are, say, backed by fundamentals? How would you do that evaluation yourself, if it was your job? I'm assuming that you don't intend your point to be "the only difference is that in the 2008 example, someone who should've called bullshit fucked up, and this time nobody is officially supposed to call bullshit, you're supposed to do it yourself."
not2b 4y ago
It's difficult to maintain a peg when it starts to become unsustainable and the big players start to bet against you. Reminds me of when Soros took on the Bank of England and won: they were trying to peg the value of the pound using the European Exchange Rate Mechanism (the precursor to the Euro). These guys can use up all their capital easily.
- ShamelessC 4y ago
  Of course it's hard. Perhaps they should have thought about that before trying to be a middleman in a grifter's market.
  - Mo3 4y ago
    I’m sure they thought about it a lot. Thinking alone doesn’t really help if you dont know shit about finance.
    - ShamelessC 4y ago
      Right and grifting only works if you don't get caught.
- 323 4y ago
  The pound peg broke because the price it was pegged at was fundamentally mispriced. The mispricing was the problem, not the pegging. Bulgaria pegged it's currency to the Euro for more than a decade now. And the peg is solid. There are a few more countries with solid pegs - Denmark, Hong Kong.
  - lutorm 4y ago
    All pegs are solid until they break, though. Unless the two currencies are affected exactly equally by all events and treated exactly equally by everyone, there is no single price that won't eventually be "fundamentally mispriced".
  - neilwilson 4y ago
lgats 4y ago
official update from terra https://twitter.com/terra_money/status/1523749536379793408 https://twitter.com/terra_money/status/1523749536379793408
- dragontamer 4y ago
  That was at 3:40pm EST this afternoon when the peg was at $0.95-ish or so. UST is now at $0.78 on coinbase and LUNA is down 50% in a single 24-hour period, and continues to plummet. The last 4-hours are way, way way worse for LUNA / WLUNA and UST. ---------- What was the saying? Blood in the water attracts sharks? Or something like that?
lgats 4y ago
previous thread https://news.ycombinator.com/item?id=31318328 https://news.ycombinator.com/item?id=31318328
dragontamer 4y ago
UST seems to be an "algorithmic stablecoin" that is supported by the Luna cryptocoin? It seems like you cannot trade Luna directly on coinbase. But there's a "WLUNA" (wrapped luna) that alleges to trade like Luna over the Ethereium blockchain. https://pro.coinbase.com/trade/WLUNA-USD https://pro.coinbase.com/trade/WLUNA-USD I'm not sure how any of this works. I recognize that the "algorithmic stablecoin" basically sells LUNA to prop up UST (and vice versa, when UST goes over $1, then UST is sold to prop up LUNA). But I thought that the whole TITAN / IRON thing from a few months ago proved that this structure was vulnerable? Did UST / LUNA just end up making the same mistakes as TITAN / IRON? Why is this article discussing "BTC reserves" ?? Why would they be selling BTC to prop up UST? What mechanism exists there? All of these cryptocoins have their own rules, and those rules will determine the failure case. I know how much I don't know. But at the end of the day, a $0.90 "stablecoin" is not a good look. EDIT: Wait, its now $0.78 ?? https://pro.coinbase.com/trade/UST-USD https://pro.coinbase.com/trade/UST-USD Erm... that's not good.
- acchow 4y ago
  Like like it dipped below 70 cents briefly but somehow they’ve managed to turn it around. Now at 88 cents. Miraculous recovery
- NovemberWhiskey 4y ago
  75 handle now... EDIT: 71 now. It's a bloodbath; people can't get out fast enough, there's no price support at all.
  - Animats 4y ago
    Now 68, still dropping. Volume is increasing steadily. This is a rush for the exit. Does the stabilization algorithm give up after some amount of drop, or has it already liquidated its backup pool down to 0?
    - Mo3 4y ago
      They gave away most of their reserve, over a billion in BTC to "professional market makers" to defend the peg - people realized and are now dumping LUNA, the counterpart to the peg. To make matters worse, the algorithm effectively mints new LUNA diluting the supply if the peg breaks downwards. It’s a closed feedback loop of death right now.
rvz 4y ago
Backed by Bitcoin™ - Somewhat of a so-called 'store of value' which was down 11% and $11B of it was bought at >$40,000 and moved to another wallet. What could possibly go wrong?
- netheril96 4y ago
  UST is not backed by bitcoin at all.
mckirk 4y ago
It looks like this (un-)stablecoin has lost its peg two times in the past. The interesting thing is that's it's an algorithmic stable coin: if its price is below a dollar, you can 'burn' one UST to get $1 worth of LUNA (a regular crypto currency without an enforced peg). That has a deflationary effect and is meant to raise UST's price. Conversely, if UST's price is above $1, you can burn LUNA to get back UST, inflating the supply and lowering the price. It's quite the neat idea really -- but I suppose it hinges on people believing that there is a healthy UST-LUNA ecosystem tomorrow that you can use to withdraw your funds if you want. Burning UST to get LUNA doesn't make sense if LUNA loses enough value by the time you could exchange it for something else, so I assume people rather take the loss on selling UST for less than $1, which would explain what we're seeing: Right now UST is at $0.81 and LUNA is down 47% in the last 24h. We'll see if the system is robust enough to recover from a 'bank run', if you can call it that. It at least isn't the first time the peg has been broken, and so far it's stabilized at $1 again every time.
- 1270018080 4y ago
  It's not a neat idea. There's no novel economic concept here. It's just a ponzi scheme that has run out of greater fools. Remove the layers of deception and it is fundamentally a ponzi scheme.
  - mannanj 4y ago
    As is the printing of the dollar, except it's backed by a big military and fancy bankers. Don't forget to point out how most other markets operate on similar Ponzi principles too. You can't make profit off of anything unless you can have someone else pay more for it than what you paid.
    - amanaplanacanal 4y ago
      Or if it actually creates wealth like real companies.
  - mckirk 4y ago
    You could make that argument about the majority of the crypto-currency universe, yes. I wouldn't consider an algorithmic stablecoin a ponzi scheme, though. People don't buy UST because they expect to be able to sell it to a greater fool for more; they buy it, because they expect to be able to sell it back to an equally-great fool for the same price. That expectation is founded in a shared belief in the 'value control algorithm' -- which I still think is a neat idea, in itself, because it's like a central bank in code form.
scyclow 4y ago
I really don't understand why anyone wants algorithmic stable coins. It really just seems like the worst of both worlds. If you want a crypto asset that correlates with USD, why not buy something like USDC that's actually... you know, backed by USD?
- gruez 4y ago
  Because it being backed by actual USD also means it's subject to the reach of the US federal government. That means your funds can potentially be arbitrarily frozen/seized.
  - worik 4y ago
    Not the cash in the shoebox under my bed
    - gruez 4y ago
      "cash in the shoebox under my bed" can't be sent over the internet.
      - worik 4y ago
        That is a good thing
        therealcamino 4y ago
        For just a second this exchange made me think what an insane world we'd live in if you'd always been able to spend cash in dollars without the physical bills, but could use the serial numbers on them to spend them. Imagine all the scams like the Target gift card phone calls where they try to get you to send photos of the bills.
  - 1270018080 4y ago
    It all comes back to the idea that crypto is only a novel solution for scams and illicit markets.
sub7 4y ago
I posted a few months ago that when people realize their stablecoins are not so stable, the game's half up. usdt is also an obvious fraud, as is almost all of crypto right now. Most people have no understanding of the hidden leverage built up in the system and how a small margin call in a negative sentiment env could easily trigger a 80-90% draw down. You should have cashed out/been buying high quality real estate for the past 6-8 months but if you haven't been doing that, it's still not too late to get out.
- zionic 4y ago
  DAI survived the fall from $1450 to $50 (ETH). Not all stable coins are the same, this one is so shady it’s even named to confuse investors.
  - ceeplusplus 4y ago
    The mechanism of DAI is quite a bit different. If the value of the underlying collateral crashes the created DAI is destroyed, which raises the value of DAI from its peg [1]. The only scenario in which DAI depegs in a direction against DAI holders is if the underlying collateral (i.e. Ethereum) flash crashes before anyone can liquidate the minted DAI. [1] https://makerdao.com/en/whitepaper#maker-protocol-auctions https://makerdao.com/en/whitepaper#maker-protocol-auctions
    - mstipetic 4y ago
      Sometimes when I read these things I feel like I'm going crazy, like it sounds kinda logical at first glance but when you think about it it makes no sense. Why would destroying it automatically raise value? If demand stays and supply goes down, sure, but it's not like it's something like food or housing, which people need - why would the demand stay the same?
      - lexapro 4y ago
        There will always be demand for money, especially if a dollar can be bought for cents. And the demand for food and housing also doesn't stay the same.
Barrera 4y ago
The video interview at the bottom of the article discusses the source of capital for this enterprise to "keep" the peg. The interviewee claims that the source of the capital was basically a crowdfund. The team issued a lot of the tokens, kept a lot of it (about 1/2), and sold the rest. Perpetual motion is possible in finance, but you need fancy licenses and government appointments to do it. These guys are going to prison. This thing isn't just one token, but apparently at least three. One of them (Anchor) claims a 20% yield on savings. This alone should be a red flag because that's about 1900 basis points above what you can expect to get from a good savings account or short-term treasury. I don't have time to dive into the Rube Goldberg machine that this thing appears to be, but when it ends, it will end very badly. Every Bitcoin era seems to have its Ponzi scheme. In 2017 it was BitConnect. They offered something very similar to what Anchor appears to be offering.
- 0des 4y ago
- atian 4y ago
  > These guys are going to prison. It will be interesting where, if, or how. The SEC attempted to establish jurisdiction over Do Kwon and Terraform Labs late last year but failed spectacularly.
  - toomuchtodo 4y ago
    They just hired another 20 people onto their crypto team, so hopefully they’re gearing up for more enforcement. https://www.cnbc.com/2022/05/03/sec-adds-to-cryptocurrency-regulation-staff.html https://www.cnbc.com/2022/05/03/sec-adds-to-cryptocurrency-r...
  - dragonwriter 4y ago
    > The SEC attempted to establish jurisdiction over Do Kwon and Terraform Labs late last year but failed spectacularly. The effort that produced this order in their favor in February? https://www.coindesk.com/business/2022/02/18/terra-ceo-do-kwon-ordered-to-comply-with-sec-subpoena-related-to-mirror-protocol-investigation/ https://www.coindesk.com/business/2022/02/18/terra-ceo-do-kw... How did they fail?
deleted 4y ago
[deleted]
0des 4y ago
Shouldnt have been climbin on the topsails.
deleted 4y ago
[deleted]
jwass 4y ago
Is USDC safe?
- onelesd 4y ago
  What is your definition of safe when it comes to investing in crypto? In the broader sense of the word, it is absolutely not safe because crypto is not safe.
  - everfree 4y ago
    Not safe in what sense?
    - onelesd 4y ago
      Ha! I fell into the same trap. I meant crypto is not a low-risk investment.
- cdiddy2 4y ago
  it's not threatened by this issue at all.
- purple_ferret 4y ago
  GUSD is safest
- themusicgod1 4y ago
  As long as it's backed by the USD it's not safe Stablecoins are even more of a mistake than fiat currency is
zydex 4y ago
It deserves to fail. Another crypto ecosystem bootstrapped off itself.
stickyricky 4y ago
If $1 is equal to 1 UST then why bother holding UST at all? Just hold dollars and convert for on demand usage.
- papercrane 4y ago
  My understanding is the sales pitch is that it's quicker to move in and out of a stable coin then it is convert to cash. Plus you can avoid having to keep your funds locked in at an exchange. There's been enough exchanges disappearing with people's money that I guess keeping your cash on a blockchain with a stable coin looked more secure to some traders.
  - lxgr 4y ago
    > the sales pitch is that it's quicker to move in and out of a stable coin then it is convert to cash That's true for bank account deposits as well. The sales pitch for this specific stablecoin is (was?) apparently an almost 20% APR on deposits. > There's been enough exchanges disappearing with people's money What's the functional difference between that and a stablecoin issuer disappearing with people's money?
    - papercrane 4y ago
      Bank transfers usually take some time, days in some cases. My understanding is that keeping things on chain generally makes things go smoother. > What's the functional difference between that and a stablecoin issuer disappearing with people's money? I'm not invested into any crypto, exactly because of scenarios like this. Too many wildcat banks. A lot of people are going to rediscover why our financial institutions have so much regulation.
      - skinnymuch 4y ago
        Debit card transactions can and normally are instant. The fee maxes out at 1-2%.
- nscalf 4y ago
bspear 4y ago
Sadly all the news around UST and its associated dramas precipitates more people to try to liquidate
betwixthewires 4y ago
I tried to tell some of these kids. I tried. You all of a sudden hear about this cool sounding new thing and you should be suspicious. "Terra", "UST is the third largest stablecoin" and I looked at it and it looked a lot like nubits, a previous failed attempt at a stablecoin, older than ethereum. They won't listen. The thing was a scam, it was plainly obvious.
jmyeet 4y ago
So we've been in one of the longest bull markets in modern history. I have been amazed at the wilful ignorance of Crypto Andys when it comes to why financial markets, the financial system, central banking, debt and debt markets are the way they are. There's a certain delight [1] in watching increased market volatility exposing how understanding merkle trees and consensus protocols doesn't make you an expert on what the financial system is, how it works and why it is the way it is. So lots of countries have tried pegging their currencies to other currencies, most commonly the US dollar. Your ability to do so is limited by how much money you are prepared to throw at it to counterbalance market forces. I mean this is one reason why we moved from Bretton-Woods to floating exchange rates. Central banks have far more ability to defend a peg. Still a pet can be attacked (eg [2]) if the peg is sufficiently out of line with the market. It's going to be funny to watch these crypto trainwrecks learn these lessons (again) the hard way. [1]: https://www.youtube.com/watch?v=nCQGQ5qBQTA https://www.youtube.com/watch?v=nCQGQ5qBQTA [2]: https://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp https://www.investopedia.com/ask/answers/08/george-soros-ban...
- bo1024 4y ago
  These comments don't seem very relevant to stablecoins such as this one, which are algorithmic rather than backed. (Although they are now trying to back it, but that's not how it's designed.)
  - throwawaygh 4y ago
    >>> UST loses peg >> There's a certain delight [1] in watching increased market volatility exposing how understanding merkle trees and consensus protocols doesn't make you an expert on what the financial system is, how it works and why it is the way it is. > These comments don't seem very relevant to stablecoins such as this one, which are algorithmic rather than backed Just... muah. Perfecto.
    - bo1024 4y ago
      I apologize if I gave the impression that I understand meekly trees
syspec 4y ago
This is when you wish the crypto market closed at the end of the day until the morning. Say what you will, but a cooling off period during a period panic does seem to help the market after bad Friday's or bad earnings at the end of the day.
Vladimof 4y ago
Good time to buy if you want to make 33% in less then a month, probably...
- elliekelly 4y ago
  You’re really asking a lot of the word “probably” here...
  - Vladimof 4y ago
    Yeah, just like in the stock market, also expect to loose 75%... UST is already back at $0.92 though...
bb88 4y ago
From CoinMarketCap Top 10 Holders: 56.6% Top 20 Holders: 67.05% Top 50 Holders: 82.17% So it looks like a few people can make huge decisions to swing $UST. Then you hope the algorithm either catches up or there's enough greater fools to buy in.
- rottencupcakes 4y ago
  Luna's even worse: https://coinmarketcap.com/currencies/terra-luna/holders/ https://coinmarketcap.com/currencies/terra-luna/holders/ It claims the top 10 holders hold 95.89%. Is this data correct? If so it barely seems like these are real projects, just made up things by a handful of people moving fake money around to create big numbers.
  - solumos 4y ago
    It's not correct, it's only the data on the Ethereum blockchain (Terra is on its own blockchain).
  - dodgerdan 4y ago
    The definition of Web 3. Wash trading is the backbone of this entire thing.
- solumos 4y ago
  Looking through the "top addresses" - these are mostly smart contracts on Ethereum
anm89 4y ago
Note Tether has not lost it's peg
- freefruit 4y ago
  or MIM which may become the defacto decentralized stablecoin.
  - ronyfadel 4y ago
    Is that from the same folks that made Time Wonderland and effectively rugged its holders, whilst having the guy from Quadriga as a partner?
JoeJonathan 4y ago
Apologies here, but could someone ELI5: what's the appeal of a stablecoin? If I want to hold something in an asset pegged to the dollar, why not just hold dollars?
- mNovak 4y ago
  It's the same reason you have money in a (zero interest) checking account rather than holding cash. For some that's the idea of security, others the convenience of spending "digital money" (e.g. wanting to do block-chainy things without risking the currency fluctuation of ETH or other coins).
  - strikelaserclaw 4y ago
    and for others, its a way to evade taxes
- freefruit 4y ago
  Easy to send and trade a stablecoin. May also avoid tax in certain countries. Particularly useful in decentralized finance as it's on the same chain as the token you are trading.
_zllx 4y ago
My favorite thing about this is how the founder was so confident the algorithmic (sketchy) UST would completely disrupt the overcollateralized (fully backed) DAI: https://twitter.com/stablekwon/status/1506494471873081352 https://twitter.com/stablekwon/status/1506494471873081352 Do Kwon was putting a lot of weight behind a stablecoin liquidity pool designed to cut out DAI, crv-4pool. Those who invested in the crv-4pool are left with lots and lots of UST and very little of the other FRAX, USDT or USDC. https://curve.fi/4pool https://curve.fi/4pool (Ethereum RPC wallet required to see stats) USDC: 300,086.92 (4.73%) USDT: 302,375.01 (4.76%) UST: 5,443,729.24 (85.77%) FRAX: 300,405.16 (4.73%)
- simulate-me 4y ago
  Assuming an algorithmic stable coin could work reliably, wouldn’t it be strictly better than a stable coin backed by fiat? Getting it to work seems like it would be a real innovation.
jtchang 4y ago
Something interesting to note about pegs is that they can be quite exploitable. Some banks/countries have tried to defend their peg but in the end it can ruinous (or wildly profitable) depending on what side you are on. Some history: https://historyofyesterday.com/the-day-george-soros-broke-the-bank-of-england-to-make-1-1b-4834df0605d1 https://historyofyesterday.com/the-day-george-soros-broke-th...
rhinoceraptor 4y ago
How does loaning bitcoin to market makers defend the peg, other than just by wash trading?
gigatexal 4y ago
Is the house of cards finally falling?
- everfree 4y ago
  It looks like TerraUSD has already fallen, honestly. A dollar stablecoin that occasionally dips to $0.75 is a non-starter.
zby 4y ago
OK - so who is shorting LUNA now? The yields look pale in comparison with the drops now - so I guess the only buyers of LUNA are shorters taking profits.
- kgc 4y ago
  How do you short LUNA?
epa 4y ago
Tether scam can and will go down, when is the billion dollar question.
- shahmeern 4y ago
  I’m surprised and sad that UST blew up before tether
nathias 4y ago
I really like what Do Kwon is creating, the whole Terra project is amazing. I hope he doesn't get killed by the US criminal law system.
ogogmad 4y ago
I've asked people questions about stablecoins before on other fora, and I get the impression that even if they maintain their peg, they wouldn't be useful to mere mortals as opposed to big crypto exchanges. Just so that others and myself can be absolutely clear, what are USD-pegged stablecoins for? No snarky answers, please. I ask this because: - you can't actually shop in your supermarket using stablecoins - there is more risk to them than holding USD - there is no increase in privacy because blockchains are public ledgers - it's not bankless because the stablecoin issuer is effectively a (poor) bank - it doesn't bypass KYC or AML because a regulator can decide that stablecoins are effectively currency. Also, Bitfinex requires their KYC forms to be filled out before you can withdraw stablecoins, making them no better than fiat, at least within the context of that exchange. If other crypto exchanges are like this, then you are better off converting to fiat every single time. From discussions with people, this appears to be a weird dance that means regulators can't regulate, for some reason.
- k__ 4y ago
  You gotta keep them in a non-custodial wallet and they're less volatile than non-stablecoins.
  - ogogmad 4y ago
    sigh This is the bullshit non-answer I'm used to. > You gotta keep them in a non-custodial wallet Bullshit. That's called a bank. Turn it into cash and stick it in a normal bank.
    - k__ 4y ago
      Why would I want to do that?
      - ogogmad 4y ago
        Stick it in an ordinary bank? Because that's insured, and therefore strictly safer than a "stable" coin. Beats your "non-custodial wallet".
andix 4y ago
I never understood why i should use stablecoins instead of the regular banking system, which is highly regulated, to secure my money as good as possible. Stablecoins are just the worst of both worlds, aren’t they?
- quickthrower2 4y ago
  In answered in another comment but usually for gambling or nefarious reasons.
  - shahmeern 4y ago
    To avoid delays with traditional money rails. Most usage is for DeFi (you’d prbly call it gambling) but I also know people who use it for remittances. Believe it or not, sending stablecoins internationally and off ramping at a foreign bank acc is faster / cheaper than using something like western union
    - andix 4y ago
      In Europe we have now SEPA real time bank transfers. And they are really real time: less than 30 seconds. Also internationally
jwmoz 4y ago
Free arb if the big boys bail it out. Which I'm betting on.
- quickthrower2 4y ago
  A bit like laying the outlier in a horse race is a free win.
arcticbull 4y ago
Now let's do USDT
mattwilsonn888 4y ago
Permissioned chains are not inherently bad, but people must understand the difference between a permissioned chain and an economically open protocol (there's a spectrum). And much of the insidiousness in crypto these last two years is the former posing as the latter.
quickthrower2 4y ago
Q. Why would people buy something worth a dollar at max and potentially nothing? A. Day trading speculation; Tax evasion; Money laundering
- shahmeern 4y ago
  There are other reasons why having stablecoins is useful. Regular money can’t be transferred digitally. If you want to send money to someone, both your bank and their bank need to speak the same protocol. This isn’t an issue usually but try sending a large transfer (>100k) or sending money internationally. Stablecoins have the protocol built into it. Just by using a stablecoin, you are able to receive and send the coins digitally to anyone else who uses them.
  - quickthrower2 4y ago
    That is true, but I have used Forex services before to transfer money internationally. Using stablecoins is going to be harder. Forex service: 1. Set up deal. 2. Country A: Transfer your Bank -> Forex Bank 3. Country B: Receive Forex Bank -> your Bank "Large" transfers (I am not rich so someone can chime in about millions) are a bit different. There is no problem doing the above, it is the same. But you might trigger AML/KYC questions at both the banks and with the Forex service. But this might also happen when transferring from fiat to crypto (more likely, many banks are now extra careful if they think the money is going to crypto).
nailer 4y ago
'Stablecoin' was always a marketing term and people outside the company should never have adopted it ('so-called-Stablecoin' would have been fine). Someone at a company doesn't decide that UST is worth 1 USD if they don't have the USD to back it up. The market does.
Al-Khwarizmi 4y ago
As someone who understands the basics of crypto, and markets in general, but doesn't have the time to go read the fine detail, I have always wondered what I was missing to understand how stablecoins not backed by their reference currency could possibly work, i.e., guarantee that they are always at parity with their reference currency. This seems explanatory... apparently, what I was missing is that they just don't.
- Sebb767 4y ago
  Stable coins work on the principle that the issuer has the equivalent value of the minted coins as backing and will always trade these coins in or sell them for their dollar value. Therefore, nobody has the incentive to sell below their value, as they could always trade them in with the issuer, and nobody wants to buy above their value, as they can always buy them from the issuer. As the issuer (theoretically) has the whole market value as backing, you can also be sure that the price never drops. Now, in practice, having billions of dollars flying around is both very hard and unpractical. Therefore, issuers can use different stuff (like investments) as backing or, as in this case, just don't have anything approaching the necessary value at all.
  - mcintyre1994 4y ago
    This is fundamentally different though, they never claimed AFAIK to be backed in that way like eg. USDT/USDC do. It's supposed to algorithmically maintain its peg, by being swapped with LUNA. I think the idea is that if it drops below $1 then people will swap it for LUNA, which burns the UST, reducing the total supply and increasing its value. And likewise you can swap LUNA for freshly minted UST, I think - so if it gets above $1 people will do that and the increased supply will push the price back down. I don't understand what was expected to happen if LUNA dropped 50%+ as it has, and as all non-pegged cryptocurrencies historically sometimes do. I might be missing something but it seems like this sort of peg can only hold if that LUNA token has low volatility.
    - polygamous_bat 4y ago
      That is exactly what was so Ponzi about UST/Luna in the first place. It all works well and fine as long as the value of Luna keeps going up, since you have excess backing for every UST created. However, soon as Luna starts going down, your entire ecosystem is at an existential risk. This mechanism was further prolonged by Anchor, a DeFi protocol that "guaranteed" a "stable" 20% return on deposited UST. What it practically did was encouraged people to buy and hold UST, thus (a) providing much needed liquidity for creators of Luna/UST to cash out into other stablecoins or real money and (b) kept the musical chairs running, since as long as the greater fools kept buying and capital kept flowing into the ecosystem, the stability of UST/Luna wasn't challenged. These people should be in jail, IMO. UST/Luna was a technologically advanced Ponzi scheme, which also "solved" the age old Satoshi problem of "if you, the creator, have a few billion dollars in Bitcoins, but not enough people/liquidity in the market to sell it to, how do you cash out?"
5350-uiop-1130 4y ago
This entire market is a joke. Give it 1-2 months and LUNA will be at all time highs. I remember when the Axie Ronin network was hacked for $600 million ETH. That same day Axie pumped 20%+. There is no logic here. BTC goes up, most alts go up too.
ronyfadel 4y ago
It’s back to $0.92, incredible arbitrage opportunity right now to make 8% in little time (high risk obvs)
- kevinventullo 4y ago
  I don’t think the word “arbitrage” applies when there is high risk.
black_13 4y ago
floatinglotus 4y ago
It’s an algorithmic margin call!
rufusroflpunch 4y ago
The concept of decentralized "stablecoins" is fool's gold. It is not possible because it requires an outside source of truth (price of fiat) to be injected into the system by a trusted third party. The reason that proof of work is absolutely necessary for both decentralization and scarcity is because the only objective source of truth available from meatspace is raw computation. Nothing else is trustlessly verifiable in cyberspace other than computation.
gw67 4y ago
Luna token is losing -50%
hitovst 4y ago
Fraud. Any chance there will be justice? I won't hold my breath.

655 points by lxm 4y ago

TedShiller 4y ago

That means it’s not really stable right? Should be renamed to Unstablecoin

Proven 4y ago

TrapLord_Rhodo 4y ago

Eh, it will repeg eventually now that they are making it centralized like Dia and Tether. They can artificially inflate it up some non-zero amount backing the stablecoin and it will go back to 1. Pretty good arb opportunity if you have the stomach. Do Kwon: "By my hand, Dai will die" Do Kwon two months later: "i will become Dai"

gruez 4y ago

Note this is UST (TerraUSD), not USDT (Tether) the stablecoin controlled by Bitfinex.

arebop 4y ago
USDT has about $84 billion market cap, USDC has about $49 billion, UST had about $18.7 billion, as of 7 May [https://cryptonews.com/exclusives/usdt-vs-usdc-vs-ust-how-do-they-compare.htm https://cryptonews.com/exclusives/usdt-vs-usdc-vs-ust-how-do...].
flockonus 4y ago
good clarifying point, the 2nd one never had a peg? argument: https://www.youtube.com/watch?v=dAQP3cPUNtA https://www.youtube.com/watch?v=dAQP3cPUNtA
- javert 4y ago
  It has a peg. All that means is that they're targeting a particular exchange rate and managing to maintain it. The allegation is that it's not fully backed.
  - chii 4y ago
    > managing to maintain it. The allegation is that it's not fully backed. Which means if there's a run on the currency, those backing assets might not actually be able to be liquidated at a price that can back the withdrawals. Aka, the peg is only good if there's no run on the currency - allegedly anyway. I personally wouldn't trust it.
    - rtkwe 4y ago
      Ah you see they don't actually have any obligation to cash out USDT to USD at all if it would cause them issues. It's right in the contract. For all the talk of fiat and money printers it's crazy how central USDT is to the crypto markets. I suppose people are willing to overlook a lot to avoid tax exposures... [0] https://tether.to/en/legal/#:~:text=Tether%20reserves%20the,in%20the%20Reserves https://tether.to/en/legal/#:~:text=Tether%20reserves%20the,....
      - gruez 4y ago
        >I suppose people are willing to overlook a lot to avoid tax exposures... I don't see how that's the case? Doing any sort of trade is a taxable event. The tax is due in the year that the trade was made, not when it hits your bank account.
rtkwe 4y ago
I'm continually surprised USDT doesn't unpeg. Going from "100% backed" by USD reserves as questionable as that was to being backed by a mix of crypto holdings (who's price is heavily affected if USDT is pumping money into crypto) and commercial paper really didn't seem to have any affect on it's use. For all the winging about money printing and crypto not being printed USDT is seemingly a huge money printer forming a pretty central part of the crypto economy.
- derac 4y ago
  it just did lol
- xvector 4y ago
  Everyone knows USDT is a problem. The issue is that exchanges refuse to stop accepting it.
  - 0des 4y ago
    I also fully believe Bitfinex is likely to be manipulating USDT. It is the only way it makes sense. But check this out, here's why you should not wish too hard on its failure: It is too big to fail because a lot of BTC would lose value over night, the entire plug would be pulled out of the industry due to the loss of confidence. Predatory and uninformed legislation would happen while the price and negotiating power is low, and in this time, that is when you really see the blood hit the floor with regard to scams, theft, crime, etc. Regardless of your position on USDT, you should pray this never happens. Edit: For the critics of cryptocurrencies responding below, allow me to make this response -- I didn't have anything to do with subprime mortgages, along with most of USA, however we all paid dearly for that mistake. As the comingling of cryptocurrency and traditional markets become increasingly intertwined, what makes you think that the ancillary effects of a crypto crash wouldn't effect you in some way?
    - tekstar 4y ago
      Sorry where's the downside? That all sounds pretty good, especially for the environment.

vmception 4y ago

Permission to fail, granted Which is what I like most about that ecosystem, just do it, accept the consequences, rapidly iterate to something more resilient

aaronbrethorst 4y ago
Like the US dollar, perhaps?
- VWWHFSfQ 4y ago
  > Like the US dollar We're going on 10+ years of failed cryptoscams now and people on the internet are still saying goofy stuff like this as if it has any meaning whatsoever in the real world or are in any way similar.
  - AnimalMuppet 4y ago
    I think you may have misread the GP. I think the point may have been that the US dollar was the "something more resilient".
    - deleted 4y ago
      [deleted]
    - vmception 4y ago
      if GP is referring to me, I wasn't making that point, I was mostly thinking about how ideation in the crypto space rapidly evolves because people are willing to try, all levels of the stack improve, consumers and investors rapidly become more discerning. lifecycles that are decades long in other markets play out in months or weeks in the crypto space.
      - AnimalMuppet 4y ago
        No, "GP" referred to the grandparent of my post, which was aaronbrethorst.

frgtpsswrdlame 4y ago

You know we had 2008 and we learned that in high finance there were these complex derivatives that a lot of people understood in a loose sense, but rarely in a detailed sense. And that they were basing those complex instruments on credit ratings that were essentially fraudulent. And that structure of a fraudulent base and mounds of complexity on top can surf for a really long time before blowing up catastrophically. How is this not just the exact same formula? "Oh you see it's stable because there's this exchange mechanism and it's attached to this floating currency, blah blah blah." It all sounds very complex but then it breaks and you look underneath and it seems like anyone who understood what the mechanics actually were would've always been a little sketched out by it. Is this whole ecosystem not just small-time hobbyists and programmers trying to create this exact dangerous dynamic over and over?

gruez 4y ago
>How is this not just the exact same formula? Is it? Specifically, what's the equivalent of "credit ratings that were essentially fraudulent"? If you read the smart contract code, misunderstood how it worked, proceeded to invest anyways, and then it blew up, that sounds like something that's on you. If you invested in some opaque financial product (I don't think MBS buyers can go through each mortgage with a fine toothed comb) and the independent third party that's supposed to be evaluating it was actually biased, that's at least partially on the seller and/or third party.
- ShamelessC 4y ago
  > If you read the smart contract code, misunderstood how it worked, proceeded to invest anyways, and then it blew up, that sounds like something that's on you. Not a software engineer or information security professional I gather...
- majormajor 4y ago
  So would you propose an independent third part to evaluate all these various things, and see which ones are, say, backed by fundamentals? How would you do that evaluation yourself, if it was your job? I'm assuming that you don't intend your point to be "the only difference is that in the 2008 example, someone who should've called bullshit fucked up, and this time nobody is officially supposed to call bullshit, you're supposed to do it yourself."

not2b 4y ago

It's difficult to maintain a peg when it starts to become unsustainable and the big players start to bet against you. Reminds me of when Soros took on the Bank of England and won: they were trying to peg the value of the pound using the European Exchange Rate Mechanism (the precursor to the Euro). These guys can use up all their capital easily.

ShamelessC 4y ago
Of course it's hard. Perhaps they should have thought about that before trying to be a middleman in a grifter's market.
- Mo3 4y ago
  I’m sure they thought about it a lot. Thinking alone doesn’t really help if you dont know shit about finance.
  - ShamelessC 4y ago
    Right and grifting only works if you don't get caught.
323 4y ago
The pound peg broke because the price it was pegged at was fundamentally mispriced. The mispricing was the problem, not the pegging. Bulgaria pegged it's currency to the Euro for more than a decade now. And the peg is solid. There are a few more countries with solid pegs - Denmark, Hong Kong.
- lutorm 4y ago
  All pegs are solid until they break, though. Unless the two currencies are affected exactly equally by all events and treated exactly equally by everyone, there is no single price that won't eventually be "fundamentally mispriced".
- neilwilson 4y ago

lgats 4y ago

official update from terra https://twitter.com/terra_money/status/1523749536379793408 https://twitter.com/terra_money/status/1523749536379793408

dragontamer 4y ago
That was at 3:40pm EST this afternoon when the peg was at $0.95-ish or so. UST is now at $0.78 on coinbase and LUNA is down 50% in a single 24-hour period, and continues to plummet. The last 4-hours are way, way way worse for LUNA / WLUNA and UST. ---------- What was the saying? Blood in the water attracts sharks? Or something like that?

lgats 4y ago

previous thread https://news.ycombinator.com/item?id=31318328 https://news.ycombinator.com/item?id=31318328

dragontamer 4y ago

UST seems to be an "algorithmic stablecoin" that is supported by the Luna cryptocoin? It seems like you cannot trade Luna directly on coinbase. But there's a "WLUNA" (wrapped luna) that alleges to trade like Luna over the Ethereium blockchain. https://pro.coinbase.com/trade/WLUNA-USD https://pro.coinbase.com/trade/WLUNA-USD I'm not sure how any of this works. I recognize that the "algorithmic stablecoin" basically sells LUNA to prop up UST (and vice versa, when UST goes over $1, then UST is sold to prop up LUNA). But I thought that the whole TITAN / IRON thing from a few months ago proved that this structure was vulnerable? Did UST / LUNA just end up making the same mistakes as TITAN / IRON? Why is this article discussing "BTC reserves" ?? Why would they be selling BTC to prop up UST? What mechanism exists there? All of these cryptocoins have their own rules, and those rules will determine the failure case. I know how much I don't know. But at the end of the day, a $0.90 "stablecoin" is not a good look. EDIT: Wait, its now $0.78 ?? https://pro.coinbase.com/trade/UST-USD https://pro.coinbase.com/trade/UST-USD Erm... that's not good.

acchow 4y ago
Like like it dipped below 70 cents briefly but somehow they’ve managed to turn it around. Now at 88 cents. Miraculous recovery
NovemberWhiskey 4y ago
75 handle now... EDIT: 71 now. It's a bloodbath; people can't get out fast enough, there's no price support at all.
- Animats 4y ago
  Now 68, still dropping. Volume is increasing steadily. This is a rush for the exit. Does the stabilization algorithm give up after some amount of drop, or has it already liquidated its backup pool down to 0?
  - Mo3 4y ago
    They gave away most of their reserve, over a billion in BTC to "professional market makers" to defend the peg - people realized and are now dumping LUNA, the counterpart to the peg. To make matters worse, the algorithm effectively mints new LUNA diluting the supply if the peg breaks downwards. It’s a closed feedback loop of death right now.

rvz 4y ago

Backed by Bitcoin™ - Somewhat of a so-called 'store of value' which was down 11% and $11B of it was bought at >$40,000 and moved to another wallet. What could possibly go wrong?

netheril96 4y ago
UST is not backed by bitcoin at all.

mckirk 4y ago

It looks like this (un-)stablecoin has lost its peg two times in the past. The interesting thing is that's it's an algorithmic stable coin: if its price is below a dollar, you can 'burn' one UST to get $1 worth of LUNA (a regular crypto currency without an enforced peg). That has a deflationary effect and is meant to raise UST's price. Conversely, if UST's price is above $1, you can burn LUNA to get back UST, inflating the supply and lowering the price. It's quite the neat idea really -- but I suppose it hinges on people believing that there is a healthy UST-LUNA ecosystem tomorrow that you can use to withdraw your funds if you want. Burning UST to get LUNA doesn't make sense if LUNA loses enough value by the time you could exchange it for something else, so I assume people rather take the loss on selling UST for less than $1, which would explain what we're seeing: Right now UST is at $0.81 and LUNA is down 47% in the last 24h. We'll see if the system is robust enough to recover from a 'bank run', if you can call it that. It at least isn't the first time the peg has been broken, and so far it's stabilized at $1 again every time.

1270018080 4y ago
It's not a neat idea. There's no novel economic concept here. It's just a ponzi scheme that has run out of greater fools. Remove the layers of deception and it is fundamentally a ponzi scheme.
- mannanj 4y ago
  As is the printing of the dollar, except it's backed by a big military and fancy bankers. Don't forget to point out how most other markets operate on similar Ponzi principles too. You can't make profit off of anything unless you can have someone else pay more for it than what you paid.
  - amanaplanacanal 4y ago
    Or if it actually creates wealth like real companies.
- mckirk 4y ago
  You could make that argument about the majority of the crypto-currency universe, yes. I wouldn't consider an algorithmic stablecoin a ponzi scheme, though. People don't buy UST because they expect to be able to sell it to a greater fool for more; they buy it, because they expect to be able to sell it back to an equally-great fool for the same price. That expectation is founded in a shared belief in the 'value control algorithm' -- which I still think is a neat idea, in itself, because it's like a central bank in code form.

scyclow 4y ago

I really don't understand why anyone wants algorithmic stable coins. It really just seems like the worst of both worlds. If you want a crypto asset that correlates with USD, why not buy something like USDC that's actually... you know, backed by USD?

gruez 4y ago
Because it being backed by actual USD also means it's subject to the reach of the US federal government. That means your funds can potentially be arbitrarily frozen/seized.
- worik 4y ago
  Not the cash in the shoebox under my bed
  - gruez 4y ago
    "cash in the shoebox under my bed" can't be sent over the internet.
    - worik 4y ago
      That is a good thing
      - therealcamino 4y ago
        For just a second this exchange made me think what an insane world we'd live in if you'd always been able to spend cash in dollars without the physical bills, but could use the serial numbers on them to spend them. Imagine all the scams like the Target gift card phone calls where they try to get you to send photos of the bills.
- 1270018080 4y ago
  It all comes back to the idea that crypto is only a novel solution for scams and illicit markets.

sub7 4y ago

I posted a few months ago that when people realize their stablecoins are not so stable, the game's half up. usdt is also an obvious fraud, as is almost all of crypto right now. Most people have no understanding of the hidden leverage built up in the system and how a small margin call in a negative sentiment env could easily trigger a 80-90% draw down. You should have cashed out/been buying high quality real estate for the past 6-8 months but if you haven't been doing that, it's still not too late to get out.

zionic 4y ago
DAI survived the fall from $1450 to $50 (ETH). Not all stable coins are the same, this one is so shady it’s even named to confuse investors.
- ceeplusplus 4y ago
  The mechanism of DAI is quite a bit different. If the value of the underlying collateral crashes the created DAI is destroyed, which raises the value of DAI from its peg [1]. The only scenario in which DAI depegs in a direction against DAI holders is if the underlying collateral (i.e. Ethereum) flash crashes before anyone can liquidate the minted DAI. [1] https://makerdao.com/en/whitepaper#maker-protocol-auctions https://makerdao.com/en/whitepaper#maker-protocol-auctions
  - mstipetic 4y ago
    Sometimes when I read these things I feel like I'm going crazy, like it sounds kinda logical at first glance but when you think about it it makes no sense. Why would destroying it automatically raise value? If demand stays and supply goes down, sure, but it's not like it's something like food or housing, which people need - why would the demand stay the same?
    - lexapro 4y ago
      There will always be demand for money, especially if a dollar can be bought for cents. And the demand for food and housing also doesn't stay the same.

Barrera 4y ago

The video interview at the bottom of the article discusses the source of capital for this enterprise to "keep" the peg. The interviewee claims that the source of the capital was basically a crowdfund. The team issued a lot of the tokens, kept a lot of it (about 1/2), and sold the rest. Perpetual motion is possible in finance, but you need fancy licenses and government appointments to do it. These guys are going to prison. This thing isn't just one token, but apparently at least three. One of them (Anchor) claims a 20% yield on savings. This alone should be a red flag because that's about 1900 basis points above what you can expect to get from a good savings account or short-term treasury. I don't have time to dive into the Rube Goldberg machine that this thing appears to be, but when it ends, it will end very badly. Every Bitcoin era seems to have its Ponzi scheme. In 2017 it was BitConnect. They offered something very similar to what Anchor appears to be offering.

0des 4y ago
atian 4y ago
> These guys are going to prison. It will be interesting where, if, or how. The SEC attempted to establish jurisdiction over Do Kwon and Terraform Labs late last year but failed spectacularly.
- toomuchtodo 4y ago
  They just hired another 20 people onto their crypto team, so hopefully they’re gearing up for more enforcement. https://www.cnbc.com/2022/05/03/sec-adds-to-cryptocurrency-regulation-staff.html https://www.cnbc.com/2022/05/03/sec-adds-to-cryptocurrency-r...
- dragonwriter 4y ago
  > The SEC attempted to establish jurisdiction over Do Kwon and Terraform Labs late last year but failed spectacularly. The effort that produced this order in their favor in February? https://www.coindesk.com/business/2022/02/18/terra-ceo-do-kwon-ordered-to-comply-with-sec-subpoena-related-to-mirror-protocol-investigation/ https://www.coindesk.com/business/2022/02/18/terra-ceo-do-kw... How did they fail?

deleted 4y ago

[deleted]

0des 4y ago

Shouldnt have been climbin on the topsails.

deleted 4y ago

[deleted]

jwass 4y ago

Is USDC safe?

onelesd 4y ago
What is your definition of safe when it comes to investing in crypto? In the broader sense of the word, it is absolutely not safe because crypto is not safe.
- everfree 4y ago
  Not safe in what sense?
  - onelesd 4y ago
    Ha! I fell into the same trap. I meant crypto is not a low-risk investment.
cdiddy2 4y ago
it's not threatened by this issue at all.
purple_ferret 4y ago
GUSD is safest
themusicgod1 4y ago
As long as it's backed by the USD it's not safe Stablecoins are even more of a mistake than fiat currency is

zydex 4y ago

It deserves to fail. Another crypto ecosystem bootstrapped off itself.

stickyricky 4y ago

If $1 is equal to 1 UST then why bother holding UST at all? Just hold dollars and convert for on demand usage.

papercrane 4y ago
My understanding is the sales pitch is that it's quicker to move in and out of a stable coin then it is convert to cash. Plus you can avoid having to keep your funds locked in at an exchange. There's been enough exchanges disappearing with people's money that I guess keeping your cash on a blockchain with a stable coin looked more secure to some traders.
- lxgr 4y ago
  > the sales pitch is that it's quicker to move in and out of a stable coin then it is convert to cash That's true for bank account deposits as well. The sales pitch for this specific stablecoin is (was?) apparently an almost 20% APR on deposits. > There's been enough exchanges disappearing with people's money What's the functional difference between that and a stablecoin issuer disappearing with people's money?
  - papercrane 4y ago
    Bank transfers usually take some time, days in some cases. My understanding is that keeping things on chain generally makes things go smoother. > What's the functional difference between that and a stablecoin issuer disappearing with people's money? I'm not invested into any crypto, exactly because of scenarios like this. Too many wildcat banks. A lot of people are going to rediscover why our financial institutions have so much regulation.
    - skinnymuch 4y ago
      Debit card transactions can and normally are instant. The fee maxes out at 1-2%.
nscalf 4y ago

bspear 4y ago

Sadly all the news around UST and its associated dramas precipitates more people to try to liquidate

betwixthewires 4y ago

I tried to tell some of these kids. I tried. You all of a sudden hear about this cool sounding new thing and you should be suspicious. "Terra", "UST is the third largest stablecoin" and I looked at it and it looked a lot like nubits, a previous failed attempt at a stablecoin, older than ethereum. They won't listen. The thing was a scam, it was plainly obvious.

jmyeet 4y ago

So we've been in one of the longest bull markets in modern history. I have been amazed at the wilful ignorance of Crypto Andys when it comes to why financial markets, the financial system, central banking, debt and debt markets are the way they are. There's a certain delight [1] in watching increased market volatility exposing how understanding merkle trees and consensus protocols doesn't make you an expert on what the financial system is, how it works and why it is the way it is. So lots of countries have tried pegging their currencies to other currencies, most commonly the US dollar. Your ability to do so is limited by how much money you are prepared to throw at it to counterbalance market forces. I mean this is one reason why we moved from Bretton-Woods to floating exchange rates. Central banks have far more ability to defend a peg. Still a pet can be attacked (eg [2]) if the peg is sufficiently out of line with the market. It's going to be funny to watch these crypto trainwrecks learn these lessons (again) the hard way. [1]: https://www.youtube.com/watch?v=nCQGQ5qBQTA https://www.youtube.com/watch?v=nCQGQ5qBQTA [2]: https://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp https://www.investopedia.com/ask/answers/08/george-soros-ban...

bo1024 4y ago
These comments don't seem very relevant to stablecoins such as this one, which are algorithmic rather than backed. (Although they are now trying to back it, but that's not how it's designed.)
- throwawaygh 4y ago
  >>> UST loses peg >> There's a certain delight [1] in watching increased market volatility exposing how understanding merkle trees and consensus protocols doesn't make you an expert on what the financial system is, how it works and why it is the way it is. > These comments don't seem very relevant to stablecoins such as this one, which are algorithmic rather than backed Just... muah. Perfecto.
  - bo1024 4y ago
    I apologize if I gave the impression that I understand meekly trees

syspec 4y ago

This is when you wish the crypto market closed at the end of the day until the morning. Say what you will, but a cooling off period during a period panic does seem to help the market after bad Friday's or bad earnings at the end of the day.

Vladimof 4y ago

Good time to buy if you want to make 33% in less then a month, probably...

elliekelly 4y ago
You’re really asking a lot of the word “probably” here...
- Vladimof 4y ago
  Yeah, just like in the stock market, also expect to loose 75%... UST is already back at $0.92 though...

bb88 4y ago

From CoinMarketCap Top 10 Holders: 56.6% Top 20 Holders: 67.05% Top 50 Holders: 82.17% So it looks like a few people can make huge decisions to swing $UST. Then you hope the algorithm either catches up or there's enough greater fools to buy in.

rottencupcakes 4y ago
Luna's even worse: https://coinmarketcap.com/currencies/terra-luna/holders/ https://coinmarketcap.com/currencies/terra-luna/holders/ It claims the top 10 holders hold 95.89%. Is this data correct? If so it barely seems like these are real projects, just made up things by a handful of people moving fake money around to create big numbers.
- solumos 4y ago
  It's not correct, it's only the data on the Ethereum blockchain (Terra is on its own blockchain).
- dodgerdan 4y ago
  The definition of Web 3. Wash trading is the backbone of this entire thing.
solumos 4y ago
Looking through the "top addresses" - these are mostly smart contracts on Ethereum

anm89 4y ago

Note Tether has not lost it's peg

freefruit 4y ago
or MIM which may become the defacto decentralized stablecoin.
- ronyfadel 4y ago
  Is that from the same folks that made Time Wonderland and effectively rugged its holders, whilst having the guy from Quadriga as a partner?

JoeJonathan 4y ago

Apologies here, but could someone ELI5: what's the appeal of a stablecoin? If I want to hold something in an asset pegged to the dollar, why not just hold dollars?

mNovak 4y ago
It's the same reason you have money in a (zero interest) checking account rather than holding cash. For some that's the idea of security, others the convenience of spending "digital money" (e.g. wanting to do block-chainy things without risking the currency fluctuation of ETH or other coins).
- strikelaserclaw 4y ago
  and for others, its a way to evade taxes
freefruit 4y ago
Easy to send and trade a stablecoin. May also avoid tax in certain countries. Particularly useful in decentralized finance as it's on the same chain as the token you are trading.

_zllx 4y ago

My favorite thing about this is how the founder was so confident the algorithmic (sketchy) UST would completely disrupt the overcollateralized (fully backed) DAI: https://twitter.com/stablekwon/status/1506494471873081352 https://twitter.com/stablekwon/status/1506494471873081352 Do Kwon was putting a lot of weight behind a stablecoin liquidity pool designed to cut out DAI, crv-4pool. Those who invested in the crv-4pool are left with lots and lots of UST and very little of the other FRAX, USDT or USDC. https://curve.fi/4pool https://curve.fi/4pool (Ethereum RPC wallet required to see stats) USDC: 300,086.92 (4.73%) USDT: 302,375.01 (4.76%) UST: 5,443,729.24 (85.77%) FRAX: 300,405.16 (4.73%)

simulate-me 4y ago
Assuming an algorithmic stable coin could work reliably, wouldn’t it be strictly better than a stable coin backed by fiat? Getting it to work seems like it would be a real innovation.

jtchang 4y ago

Something interesting to note about pegs is that they can be quite exploitable. Some banks/countries have tried to defend their peg but in the end it can ruinous (or wildly profitable) depending on what side you are on. Some history: https://historyofyesterday.com/the-day-george-soros-broke-the-bank-of-england-to-make-1-1b-4834df0605d1 https://historyofyesterday.com/the-day-george-soros-broke-th...

rhinoceraptor 4y ago

How does loaning bitcoin to market makers defend the peg, other than just by wash trading?

gigatexal 4y ago

Is the house of cards finally falling?

everfree 4y ago
It looks like TerraUSD has already fallen, honestly. A dollar stablecoin that occasionally dips to $0.75 is a non-starter.

zby 4y ago

OK - so who is shorting LUNA now? The yields look pale in comparison with the drops now - so I guess the only buyers of LUNA are shorters taking profits.

kgc 4y ago
How do you short LUNA?

epa 4y ago

Tether scam can and will go down, when is the billion dollar question.

shahmeern 4y ago
I’m surprised and sad that UST blew up before tether

nathias 4y ago

I really like what Do Kwon is creating, the whole Terra project is amazing. I hope he doesn't get killed by the US criminal law system.

ogogmad 4y ago

I've asked people questions about stablecoins before on other fora, and I get the impression that even if they maintain their peg, they wouldn't be useful to mere mortals as opposed to big crypto exchanges. Just so that others and myself can be absolutely clear, what are USD-pegged stablecoins for? No snarky answers, please. I ask this because: - you can't actually shop in your supermarket using stablecoins - there is more risk to them than holding USD - there is no increase in privacy because blockchains are public ledgers - it's not bankless because the stablecoin issuer is effectively a (poor) bank - it doesn't bypass KYC or AML because a regulator can decide that stablecoins are effectively currency. Also, Bitfinex requires their KYC forms to be filled out before you can withdraw stablecoins, making them no better than fiat, at least within the context of that exchange. If other crypto exchanges are like this, then you are better off converting to fiat every single time. From discussions with people, this appears to be a weird dance that means regulators can't regulate, for some reason.

k__ 4y ago
You gotta keep them in a non-custodial wallet and they're less volatile than non-stablecoins.
- ogogmad 4y ago
  sigh This is the bullshit non-answer I'm used to. > You gotta keep them in a non-custodial wallet Bullshit. That's called a bank. Turn it into cash and stick it in a normal bank.
  - k__ 4y ago
    Why would I want to do that?
    - ogogmad 4y ago
      Stick it in an ordinary bank? Because that's insured, and therefore strictly safer than a "stable" coin. Beats your "non-custodial wallet".

andix 4y ago

I never understood why i should use stablecoins instead of the regular banking system, which is highly regulated, to secure my money as good as possible. Stablecoins are just the worst of both worlds, aren’t they?

quickthrower2 4y ago
In answered in another comment but usually for gambling or nefarious reasons.
- shahmeern 4y ago
  To avoid delays with traditional money rails. Most usage is for DeFi (you’d prbly call it gambling) but I also know people who use it for remittances. Believe it or not, sending stablecoins internationally and off ramping at a foreign bank acc is faster / cheaper than using something like western union
  - andix 4y ago
    In Europe we have now SEPA real time bank transfers. And they are really real time: less than 30 seconds. Also internationally

jwmoz 4y ago

Free arb if the big boys bail it out. Which I'm betting on.

quickthrower2 4y ago
A bit like laying the outlier in a horse race is a free win.

arcticbull 4y ago

Now let's do USDT

mattwilsonn888 4y ago

Permissioned chains are not inherently bad, but people must understand the difference between a permissioned chain and an economically open protocol (there's a spectrum). And much of the insidiousness in crypto these last two years is the former posing as the latter.

quickthrower2 4y ago

Q. Why would people buy something worth a dollar at max and potentially nothing? A. Day trading speculation; Tax evasion; Money laundering

shahmeern 4y ago
There are other reasons why having stablecoins is useful. Regular money can’t be transferred digitally. If you want to send money to someone, both your bank and their bank need to speak the same protocol. This isn’t an issue usually but try sending a large transfer (>100k) or sending money internationally. Stablecoins have the protocol built into it. Just by using a stablecoin, you are able to receive and send the coins digitally to anyone else who uses them.
- quickthrower2 4y ago
  That is true, but I have used Forex services before to transfer money internationally. Using stablecoins is going to be harder. Forex service: 1. Set up deal. 2. Country A: Transfer your Bank -> Forex Bank 3. Country B: Receive Forex Bank -> your Bank "Large" transfers (I am not rich so someone can chime in about millions) are a bit different. There is no problem doing the above, it is the same. But you might trigger AML/KYC questions at both the banks and with the Forex service. But this might also happen when transferring from fiat to crypto (more likely, many banks are now extra careful if they think the money is going to crypto).

nailer 4y ago

'Stablecoin' was always a marketing term and people outside the company should never have adopted it ('so-called-Stablecoin' would have been fine). Someone at a company doesn't decide that UST is worth 1 USD if they don't have the USD to back it up. The market does.

Al-Khwarizmi 4y ago

As someone who understands the basics of crypto, and markets in general, but doesn't have the time to go read the fine detail, I have always wondered what I was missing to understand how stablecoins not backed by their reference currency could possibly work, i.e., guarantee that they are always at parity with their reference currency. This seems explanatory... apparently, what I was missing is that they just don't.

Sebb767 4y ago
Stable coins work on the principle that the issuer has the equivalent value of the minted coins as backing and will always trade these coins in or sell them for their dollar value. Therefore, nobody has the incentive to sell below their value, as they could always trade them in with the issuer, and nobody wants to buy above their value, as they can always buy them from the issuer. As the issuer (theoretically) has the whole market value as backing, you can also be sure that the price never drops. Now, in practice, having billions of dollars flying around is both very hard and unpractical. Therefore, issuers can use different stuff (like investments) as backing or, as in this case, just don't have anything approaching the necessary value at all.
- mcintyre1994 4y ago
  This is fundamentally different though, they never claimed AFAIK to be backed in that way like eg. USDT/USDC do. It's supposed to algorithmically maintain its peg, by being swapped with LUNA. I think the idea is that if it drops below $1 then people will swap it for LUNA, which burns the UST, reducing the total supply and increasing its value. And likewise you can swap LUNA for freshly minted UST, I think - so if it gets above $1 people will do that and the increased supply will push the price back down. I don't understand what was expected to happen if LUNA dropped 50%+ as it has, and as all non-pegged cryptocurrencies historically sometimes do. I might be missing something but it seems like this sort of peg can only hold if that LUNA token has low volatility.
  - polygamous_bat 4y ago
    That is exactly what was so Ponzi about UST/Luna in the first place. It all works well and fine as long as the value of Luna keeps going up, since you have excess backing for every UST created. However, soon as Luna starts going down, your entire ecosystem is at an existential risk. This mechanism was further prolonged by Anchor, a DeFi protocol that "guaranteed" a "stable" 20% return on deposited UST. What it practically did was encouraged people to buy and hold UST, thus (a) providing much needed liquidity for creators of Luna/UST to cash out into other stablecoins or real money and (b) kept the musical chairs running, since as long as the greater fools kept buying and capital kept flowing into the ecosystem, the stability of UST/Luna wasn't challenged. These people should be in jail, IMO. UST/Luna was a technologically advanced Ponzi scheme, which also "solved" the age old Satoshi problem of "if you, the creator, have a few billion dollars in Bitcoins, but not enough people/liquidity in the market to sell it to, how do you cash out?"

5350-uiop-1130 4y ago

This entire market is a joke. Give it 1-2 months and LUNA will be at all time highs. I remember when the Axie Ronin network was hacked for $600 million ETH. That same day Axie pumped 20%+. There is no logic here. BTC goes up, most alts go up too.

ronyfadel 4y ago

It’s back to $0.92, incredible arbitrage opportunity right now to make 8% in little time (high risk obvs)

kevinventullo 4y ago
I don’t think the word “arbitrage” applies when there is high risk.

black_13 4y ago

floatinglotus 4y ago

It’s an algorithmic margin call!

rufusroflpunch 4y ago

The concept of decentralized "stablecoins" is fool's gold. It is not possible because it requires an outside source of truth (price of fiat) to be injected into the system by a trusted third party. The reason that proof of work is absolutely necessary for both decentralization and scarcity is because the only objective source of truth available from meatspace is raw computation. Nothing else is trustlessly verifiable in cyberspace other than computation.

gw67 4y ago

Luna token is losing -50%

hitovst 4y ago

Fraud. Any chance there will be justice? I won't hold my breath.