Terra’s UST was briefly in danger of losing its peg as crypto markets continue to dip, putting pressure on the reserve assets that back the stablecoin.
As an algorithmic stablecoin, UST is designed to maintain price and supply stability by being pegged to reserve assets.
As Bitcoin and the broader crypto markets bled over the weekend, UST’s Tether pair, its most voluminous pair, saw a 14% drop for a brief moment following a major dump worth $300 million on Curve and Binance.
According to decentralized finance (DeFi) expert Route 2 FI who was following the developments, a massive UST sell-off on Curve, plus negative rumours on Twitter led to a $2 billion withdrawal of UST on Anchor Protocol. This caused LUNA, which partially backs UST, to tank and ultimately cause the unpegging.
“The peg will restore IMO, there is enough money in the system to back this up. Was it a coordinated attack? Maybe, idk. But nevertheless, this was an important test for the system,” he said.
While an exact explanation of what happened likely won’t come to light, Terra founder Do Kwon appears to believe it was a coordinated attack, rather than a random hiccup triggered by market volatility. Kwon retweeted the following tweet from blockchain business lawyer Caetano Manfrini:
“Today's attack on Terra-Luna-UST was deliberate and coordinated. Massive 285m UST dump on Curve and Binance by a single player followed by massive shorts on Luna and hundreds of twitter posts. Pure staging. The project is bothering someone. [Terra is] on the right path!”
LUNA remains down 15% on the week, but so is virtually the entire list of top 100 cryptocurrencies as markets weather a nasty correction.
UST has mostly stabilized and is still the tenth biggest crypto asset in the world, and the second biggest stablecoin after Tether in terms of market cap.
