Luna Foundation Guard supports the fighting VAT coupling with BTC reserves

Luna Foundation Guard supports the fighting VAT coupling with BTC reserves

Stablecoins that are coupled to the US dollar have only one task: get as close as possible to $ 1.

Every significant deviation from one-to-one connection threatens to undermine the trust of the stablecoin holders.

That was the case at Terra's VAT-StableCoin at the weekend, since she had experienced her most important stability test since May 2021 and briefly fell to about 98 cents on the large decentralized stock exchange curve finance. Today the Luna Foundation Guard (LFG) - which is commissioned to defend the plock and armed with Bitcoin worth $ 2.6 billion - guarded the city walls.

VAT is an algorithmic stable coin, the offer of which is expanded by burning Luna, the native asset of Terra. Since the demand for VAT drives the price over a dollar, Luna is burned to shape more and restore the bond. In the past 6 months, the market capitalization of almost $ 3 billion has gone up to over $ 18 billion.

When the market capitalization grows from VAT, the range of Luna shrinks, which pushes the price of Luna upwards. But the opposite is also the case-if the VAT offer shrinks and the price falls below one dollar, Luna is shaped and sold to restore the balance.

Trouble began for a Coming from the Terra-Blockchain through the Wurmlochbrücke to Ethereum, War quickly sold to curve on May 7th. Another $ 108 million in VAT from the same Terra address were sent and sold to the Bony exchange.

Such large transactions pressed the price on these exchanges clearly from the shelf, which led to major customers started Ust witha> from the lending and borrowing from dapp anchor protocol in the millions.

Anchor offers a subsidized return that was 20 % effective annual interest during most of its history, but was recently reduced to 18 %. The vast majority of VAT is stored there. Since the VAT bond started wiggling, Anchor's deposits have dropped by almost a quarter: around 3.5 billion dollars have been deducted.

After a few tense hours, do Kwon from Terraform Labs went to Twitter

In a follow-up he became philosophical and pressed his confidence in the stability of the stable coin.

"Those of them who are waiting for the earth to become unstable - I am afraid, they will wait until the age of people has expired, the cities have returned to dust, the oceans are dry, the map of the continents has been re -drawn and dinosaurs striped through the earth."

A large market operator began with the mass sale of ether to re-compensate for the VAT curve pool and support the price.

It is unclear who caused the initial mass sale of VAT, but critics have long argued that the available liquidity on the stock exchanges is not sufficient to support large-scale efforts to exchange VAT for alternative stable coins or fiat currencies.

make kwon First Bad player in a tweet that has been deleted since then, which misinterpreted the percentage of users who are responsible for anchor payments.

Caetano Manfrini, a lawyer of the Gemma Ecosystem based in Brazil, told Blockworks, he believed that the sequence of events was well coordinated.

"I don't know if all of these steps have been orchestrated, but it seems to me that someone in the middle of the night from Saturday has been waiting for a window of the opportunity (BTC-Crash) ... Opportunists [have beggers] since our existence on the market," said Manfini. "Once it happened, it will happen again."

LFG uses reserves

In an attempt to restore trust, the LFG announced on Monday that it would lend a professional market maker $ 750 million in Bitcoin and the same amount of VAT to facilitate the arbitrage operations that are required to maintain the dollar bond.

by Monday afternoon ET this Bitcoin still had to be used, according to the LfG-reserven-dashboard . An LFG representative did not immediately answer a request for comment.

meanwhile the price for one VAT was traded dangerously low and reached 0.98 %on the large stock exchanges.

This is a developing story.

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The contribution Luna Foundation Guard to Support Struggling Ust PEG with BTC Reserve is not a financial advice.