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Algorithmic Stablecoin Like $UST Prone to Pose Great Risk! Here’s What Research Says

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Algorithmic Stablecoin Like $UST Prone to Pose Great Risk! Here’s What Research Says

The UST dollar peg touched a low of $0.6 on May 10th. Shortly after the Luna Foundation Guards (LFG) finished building their $3 billion treasures last week, the stablecoin was challenged due to low liquidity.

The de-pegging of the UST Dollar began with large withdrawals from Anchor’s pool 53, and the UST Dollar fell from $1 to $0.98 as a result. Anchor is Terra’s largest yield-earning protocol, and it is responsible for steering the most demand to UST. The de-pegging cost UST’s greatest profitability source (Anchor) 60% of its deposits in just a few days. 

Traders sold bitcoin in response, and there was widespread speculation that LFG might liquidate its BTC reserves to maintain the peg. LFG outlined a proactive strategy to address the situation on May 9th, which included decentralizing its reserve strategy.

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The interruption subsided shortly after the announcement, but UST was unable to maintain its $1 peg indefinitely. It dropped to $0.9 and increased pull-outs, resulting in a $0.6 drop. Even if the LFG is successful in restoring the peg, much damage has already been done.

The Takeaway

Despite recent efforts to keep it that way, the UST stable coin continues to drift away from being a decentralized stable coin. LUNA’s price has dropped sharply (below $1) and has been temporarily suspended due to network congestion caused by UST withdrawals. While UST resumed its downward trend, LUNA’s value plummeted by 96% in just 24 hours.

Meanwhile, it appears that BTC reserves may not be adequate to sustain the peg with confidence.

With LFG’s involvement, UST may recover, but the long-term impacts on its reputation and the trust it has progressively gained from investors may take longer to recover. The current situation of the UST serves as a reminder that stronger frameworks for including structural risks for similar algorithmic stable currencies should be developed. 

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Jed McCaleb Still Holds 250 Million XRP In His Tacostand Wallet

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Jed McCaleb Still Holds 250 Million XRP In His Tacostand Wallet

According to XRPscan, Jed McCaleb, the co-founder of Ripple Labs and its first chief technology officer, has started selling huge sums of XRP on the crypto market after suspending sales in September last year.

He has escalated his selling by around 140% in the last three days, and a crypto enthusiast expects he will be done selling altogether within a month. Jed currently owns over 250 million XRP in his “tacostand” wallet.

9 Million XRP Sold Everyday

According to statistics released by the XRPscan portal, Jed McCaleb resumed selling the last of his massive XRP hoard as the year began.

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He has dumped over 464.8 million XRP since January, which is equivalent to $186,790,421 at today’s market rate.

The amount of XRP coins sold each week varies, ranging from 18 million to 26 million and 42 million. As Twitter user Rafael Ken Aguilar pointed out, he has boosted his selling volume by around 140 percent in the last three days, selling nearly nine million XRP every day, up from four to six million per day previously.

If the current selling rate holds, McCaleb expects he will be out of XRP in about a month.

To all #XRP strong believers, let me update us all.#XLM boss @JedMcCaleb whom in the last 3 days increased his XRP dump rate by approximately ~140%. So at this current rate, it requires 29 days or 1 month for his entire #Tacostand to stop dumping ducks.

While everyone forgets. pic.twitter.com/lezuTAxYFl

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— Rafael Ken Aguilar (@rafaelken1989) May 24, 2022

Jed Still Holds 250 million XRP

According to XRPscan, Jed’s wallet, “tacostand,” still has 249,200,734 XRP in it. The XRP community developed a website to track McCaleb’s sales rate, which shows a somewhat higher figure: 257,858,264 tokens. 

Hence, this is the last of the nine billion XRP granted to McCaleb by Ripple’s top management when he decided to move away from the firm a year after it was formed to start as a competitor to the blockchain Stellar.

Depending on how much XRP McCaleb sells per week, two probable dates for McCaleb to run out of XRP are listed here: July 14 and August 8. 

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According to CoinMarketCap, the sixth largest cryptocurrency, XRP, is trading at $0.404 as of this writing, down by 70.0% in the last 24 hours.

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Traders Withdraw $10M Tether USDT, Yet The Firm Claims To Be Strong

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Traders Withdraw $10M Tether USDT, Yet The Firm Claims To Be Strong

A few days ago, the global cryptocurrency market had just entered a recovery phase but that didn’t last long as the market is once again overshadowed by the bearish momentum today. 

The recent updates state that as rumors of surging regulatory scrutiny for stablecoins continues grows, crypto traders withdrew about $10 billion from Tether USDT in the previous two weeks.

As per the data USDT’s circulating supply has plunged from 11th May’s $84.2 billion to $73.3 billion yesterday, on 23rd May.

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On-chain data suggests that traders withdrew $1 billion from Tether on May 20 alone. Terra cryptocurrency UST and LUNA crash fuelled the enormous outflow. USDT, like numerous other stablecoins, lost its peg following the UST meltdown. This attracted a lot of attention towards stablecoin and its stability.

In a recent blog post, Tether claims that the de-pegging of USDT across crypto exchanges does not imply that the peg has been broken; rather, the de-peg demonstrates that the liquidity has gained more demand than that of exchange’s order books.

Tether USDT Claims To Have 1:1 Backing

Previously, Tether had said that USDT has a one-to-one dollar bank account backing, however later clarified that it utilizes various assets as collateral, including commercial paper and even digital tokens. This was disclosed after it reached a settlement with New York authorities.

As part of the settlement, the company must declare its reserves every quarter. According to the most recent attestation report, it has decreased its commercial paper holdings while boosting its holdings of US Treasury notes. The firm also announced that it is currently carrying foreign government debt. 

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Although the majority of the assets in the review are stable, “corporate bonds, funds, and precious metals” and “other investments (including digital tokens)” account for roughly 11% of the total.

On the whole, as per the reports the firm’s reserves have surpassed the amount that is required to regain the digital tokens that were issued.

Tether’s account, however, reveals it has $162 million more in reserves than its tokens, according to Patrick McKenzie, a fintech analyst. However, due to the negative character of the crypto market, some of its investments, such as those in the Celsius network, are doing poorly.

According to Paolo Ardoino, Tether’s chief technology officer, Tether’s stability has been maintained even through multiple black swan events and many highly volatile market conditions. And adds up saying, even in the darkest days, Tether has never failed to keep up with its recovery request that comes through any of its verified customers.

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278 Million LUNA Gets Burnt With The Released Address, Do Kwon Says It’s Pointless!

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278 Million LUNA Gets Burnt With The Released Address, Do Kwon Says It’s Pointless!

Do Kwon, the now-famous Terra CEO and founder, published on Twitter on May 21 a dead wallet address where people may send their LUNA tokens to be burned. The uploaded wallet was filled with nearly 280 million LUNA tokens, making the tweet one of Do Kwon’s most popular.

give us a burn luna adress we will burn it for you

— Roncin Antoine (@AntoineRoncin) May 21, 2022

terra1sk06e3dyexuq4shw77y3dsv480xv42mq73anxu

There u go

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— Do Kwon 🌕 (@stablekwon) May 21, 2022

With 2,719 transactions, the total amount of LUNA transferred to the burning address has reached 289 million, meaning that the average number of tokens sent to burn every transaction is roughly 107,000.

There was yet another round of foolishness in this narrative. On May 23, two days after the burning address was published, Do Kwon indicated that sending LUNA to that address is pointless and will result in token loss.

To clarify, as I’ve noted multiple times i dont think sending tokens to this address to burn tokens is a good idea – nothing happens except that you lose your tokens

Want there to be no confusion whatsoever https://t.co/GrzG9cclAr

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— Do Kwon 🌕 (@stablekwon) May 23, 2022

From the moment the wallet’s address was originally disclosed, 254 million LUNA were sent to the wallet and after the tweet exposed the useless idea, there were 25 million LUNA transferred.

Terra Isn’t A Ponzi Scheme

Recently, there was a statement from Pennsylvania Senator Pat Toomey that Terra may be a fraudulent project. Of course, Toomey is not alone. Terra was a classic pyramid scam, according to prominent hedge fund manager Bill Ackman, who warned that such fraudulent ventures represent a threat to the whole cryptocurrency ecosystem.

After the failing blockchain project was linked to the famed biotech fraud Theranos, FTX CEO Sam Bankman-Fried remarked that Terra wasn’t a Ponzi scheme. He stated that this project was basically driven by “mass excitement.”

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Meanwhile, South Korean officials have allegedly tried to seize the assets of Terra’s non-profit organization, Luna Foundation Guard, accusing Terra of theft. Almost all of the LFG’s money were spent on failed attempts to assist the TerraUSD (UST) stablecoin to reclaim its peg.

At the time of reporting, Terra (LUNA) is trading at $0.0001633 and TerraUSD at $0.067

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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