Member-only story
Here’s what happened to UST and LUNA in 2 minutes
As you have probably noticed, UST, one of the largest stablecoins lost it’s peg and is trading far below the $1 per UST promised. In theory it shouldn’t be possible but the system that maintains that value was terribly flawed…
You see, UST is backed by LUNA. Say UST drop to $0.9 per UST, then an algorithm will pickup that drop and burn UST to buy LUNA. So the program changes UST at $0.9 for the equivalent $1 of LUNA.
When that happens, the supply of UST is decreased and the amount of LUNA is increased. The program sell LUNA to recover their money and use it to buy UST. The peg is restored.
Apparently what happened is that there was a big move to sell a huge amount of UST to drop its price. When that happened the coin was de-pegged for a while which increased the amount of LUNA alarmingly fast, dropping the value of LUNA hard.
People noticed the big drop in peg value and all sorts of alarms went off creating FUD. A ton of people went to twitter to find answers when all they found was more worrying information and decided to sell their UST to get out of all this mess.
At one point there was around 18 billion UST in circulation which means the Terra ecosystem had to have 18 billion worth of reserves either in LUNA or others. Some days ago they bought 1.5…
