Yesterday we discussed Terra’s collapse and how it happened. Today we’ll take a closer look at the crash’s effects. Most of the initial drop has started to erase itself, with major coins like Bitcoin and Ethereum moving closer to their initial position, even so, both still have ways to go before a full recovery is complete. One major move Terra Labs made after the crash occurred was to utilize its Luna Foundation Guard, which is a fund set up by Terra creator Do Kwon.
The Foundation Guard spent almost all of the Bitcoin in its reserve last week in a futile attempt to save UST. Indeed, through a series of tweets, The Luna Foundation Guard said it transferred 52,189 Bitcoin to “trade with a counterparty” as UST collapsed below its intended $1 peg. In addition to this, Terra sold another 33,206 Bitcoin directly in an effort to defend the peg. Currently, UST is now worth just 9 cents, according to CoinGecko data and The Luna Foundation Guard has only around $9 million in Bitcoin left. Beyond the Foundation Guard, the event undermined the concept of algorithmic stable coins. This concept is integral to the philosophy of many in the blockchain community, as it would represent the ability to hold a successful peg to fiat without holding fiat assets in reserve. In other words, an algorithmic token would be truly independent of fiat (beyond the peg it intends to hold). What do you think about the Terra crash? And will newer and better algorithmic stable coins emerge from UST’s rubble?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.