What are the dangers of decoupling UST from the LUNA death spiral?

Algorithmic stability currencies always lead to uncertainties about deductions.

MakerDAO co-founder Rune tweeted on January 4 that Terra Eco Stabilitycoin UST and Abracadabra Eco Stabilitycoin MIM are Ponzi products.

Currently, there is $ 10 billion gold in the Terra ecosystem, and daily withdrawals are capped at $ 100 million. Twitter user 0xHamz posted a worst-case description for the UST detachment and LUNA's death spiral. Here are the details:

1. Terra is a decentralized blockchain designed for algorithmic stability coins.

This ecosystem works on two symbols: UST and LUNA.

UST is a fixed currency that targets 1: 1 against the US dollar.

LUNA is a symbol of management.

LUNA is considered the present value of future UST applications.

2. UST is a 100% insecure and targeted algorithm by default.

To create / build UST you have to put it in LUNA and then destroy it.

UST recently exploded in adoption.

3. Here is the result.LUNA's circulation supply will be drastically reduced while burning, and 5% of the token will be burned for 1 month.

4,90% of UST uses Anchor's deposits and loans.- Terra corporate finance platform.

Anchor guarantees 20% APY and competes with other stable agricultural products in CLC.

Who does not want to "prove" 20% return on their fixed part?

5. The key to the development of UST was degen Abracadabra, which added US $ 1.4 billion and immediately “sold”.

6. The anchor pays the depositor:

Interest is paid on the loan

Gifts for Mortgage Lenders - Especially LUNA

Most of 2021

The anchor pays the borrower UST.

burn the moon

LUNA nqi nce

Allows borrowers to use leverage

7. Also no,Anchor lets you borrow UST for free by default.

This is beneficial for LUNA because UST created the LUNA image.

8. However, please deposit APY in case of cancellation.

Anchors must find other ways to reduce filing fees or encourage more lending.

9. Current depositors only have an 80-day guarantee before Anchor adjusts the deposit and loan rates.

10. Changing the deposit rate may result in loss of funds to other channels for the following reasons:

To sell UST, you must provide LUNA.

This will lead to the LUNA value.

The value of LUNA will fall to the level that borrowers make.

Less loans mean less money to help you with your APY savings

11. When the borrower borrows USTs, LUNA deposits the money in bLUNA and submits it to the LIDO system.

The comparison of bLUNA to LUNA is important due to the uncertainty of the ankle.

After about 3 weeks in May 2021, you can convert 100 LUNA to 110 bLUNA and burn to get 110 LUNA.

12. Provide Anchor with maximum leverage and initiation of liquidation,The LUNA system is very flexible for liquidation at the $ 55 level.

13. However, the UST / LUNA swap is capped at $ 100 million and the spread is 0.5%.

Larger purchases can occur, but the spread will increase.

As of May 2021, LUNA / UST had around 80 million deletions, exceeding its 20 million redemption rate, and transmission has been cut by 7-8%.

14,The UST peg works well when the transmission is broken.

The $ 1 UST decoupling creates two commands.

Buy at 94c and wait up to $ 1 to save 6%

Buy UST on 94c, convert to 100c LUNA, sell LUNA to USDC and repeat

If UST is excluded, the ecosystem will be affected.

15. Compared to the fall of May, if the UST enters high / mid liquid and exits at $ 50,LUNA can be as high as $ 35.

At this point, LUNA's market cap could fall below the UST, creating bad mint / burn momentum.

16. Go ahead and see how the LUNA / UST market stacks up.

The relationship between LUNA and UST retail is approximately 0.80.

17. The procedure is as follows.

LUNA prices fall due to volatility

Anchor liquidation due to lower LUNA prices

Over $ 100 million in reimbursement limits, extended coverage

The larger the deviation, the lower the LUNA value

Buy cheap USTs, refund LUNA cheaply, sell LUNA in store

18. How will you make money from this course?

Sell ​​LUNA Perpetual Futures at LUNA for over $ 60

Buy bLUNA and convert to LUNA

If the lock is broken, buy UST and replace LUNA.