3 ms·

So you sell UST into Luna, buy more UST with Luna, sell UST into even more Luna, rinse and repeat?

• anm89 4y ago
  Yes, this is the nature of arbitrage opportunities. You are leveling the price of two assets by moving liquidity. You keep doing it until the prices normalize and the arbitrage opportunity dissapears. In this case "normalizing" was going to zero for luna because that is what became the shared understanding of the value of what it was backed by.
  • eudoxus 4y ago
    Luna didn't go to zero because the whole crypto market woke up and realized that was no intrinsic value to it. If it did, it never would've got as big or lasted as long as it did. There was an explicit attack that crippled the peg to the point that their algorithmic stability mechanic couldn't self heal. Which led the Luna project to attempt to assist the peg by deploying their own reserves, which unfortuently didn't work.
    • mrcartmeneses 4y ago
      Can you send explain some more?
    • shawabawa3 4y ago
      There didn't have to be an attack for this to happen It may have been, but it equally could have been mass de-risking due to market conditions causing lots of UST withdrawals. Once the peg goes for a minute, confidence soon follows and the whole house of cards unwinds LFG had $1.5B of reserves to plug a hole in a $18B leak. It never had a realistic chance of working (unless it was fast enough to stop the initial depeg, in which case it could have delayed the inevitable)
• mzs 4y ago
  but UST burning for luna is capped at $100m/day