The Fallout From Terra's UST Trashing - Extends Well Beyond Terra
Don't think for a moment my friends that the trashing of Terra and its UST stablecoin is limited to the Terra ecosystem. By now, you've heard of Terra's unsuccessful attempt to shore up its peg by dumping BTC. All that accomplished was to throw the BTC market into a downward turmoil.
Nonetheless ladies and gentlemen, the pain does not stop here. Beyond the BTC negativity and general market malaise the peg loss of UST and attempted remediation has caused, more specific cases of industry pain should be brought to light.
Avalanche
Avalanche is on a downward price tumble falling more than 30%. Why you ask?
Well, at the heart of the matter is that the Luna Foundation Guard is emptying its crypto reserves in an attempt to bring its stablecoin back to its $1-peg. That's why they sold off all that BTC. But in addition to the now sold BTC, the Luna Foundation Guard "holds 1.97 million AVAX worth nearly $74.75 million, according to data shared by analyst CrypOrca" [Gola, Y. Avalanche drops 30% on fears Terra's LFG will dump AVAX next. (Accessed May 11, 2022)].
So, tough times ahead for Avalanche.
DeFi Platforms Associated with UST are Feeling the Pain
As shown in the chart above, Anchor Protocol (ANC), Astroport (ASTRO) and Mars Protocol (MARS) saw their token prices plummet more than 80% since May 4 when LUNA price first started to correct. The protocols in question are all DeFi-focused, meaning that they had heavy integration with UST as the main stablecoin for their liquidity pairs as well as LUNA as a major source of value locked on their smart contracts.
[Finneseth, J. Terra contagion leads to 80%+ decline in DeFi protocols associated with UST. (Accessed May 11, 2022)].
Tokens Integrated with UST Taking a Hit
Assets in the Cosmos ecosystem were also hard hit by UST's collapse. ATOM and other tokens like Mirror Protocol (MIR), Osmosis (OSMO) and Kava that utilize the Interblockchain Communication Protocol (IBC) corrected sharply due to their integration with Terra.
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Losses in this area were not as dramatic as the losses seen within the Terra ecosystem. But they are, nonetheless, associated losses due to their proxy to Terra.
The Human Ill Effects
A quick look at the TerraLuna Reddit page tells the story succinctly. "For everyone panicking, here are some National helpline numbers" [Everything DeFi. For everyone panicking, here are some National helpline numbers. (Accessed May 11, 2022)
It Is Not All Doom and Gloom - One Bright Spot
Maker (MKR) is the one bright spot to emerge in trading on May 11 as crypto traders now find themselves embracing Dai (DAI) as the 'best' decentralized stablecoin option in the market. MKR price spiked 124% in trading on May 11, going from a low of $1,025 to an intraday high of $2,299 before settling back down to $1,278.
Final Thoughts
Unfortunately, there will be a cascading series of collapses as a result of the Terra UST debacle. And the negative effects will be felt within the entire crypto universe for some time to come.
It doesn't look good for a quick end to this pain.
Posted Using LeoFinance Beta
