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The algorithmic stablecoin UST crashed the market, losing its pegged value to the US dollar, Bitcoin failed to break past the $27,000 level, Elon Musk Twitter suspends the
The algorithmic stablecoin UST crashed the market, losing its pegged value to the US dollar, Bitcoin failed to break past the $27,000 level, Elon Musk Twitter suspends the buyout deal and other events of the week ahead.
On Thursday, May 12, the bitcoin price dropped to $26,700, which is comparable to the end of 2020. The drop was accompanied by significant intraday liquidations of over $1 billion in the futures market.
By the end of the week, bids have regained some of the decline. At the time of writing, the asset is trading around $30,100.
At the end of the week, all digital assets in the top 10 by market cap were in the red zone. Solana (SOL) showed the worst dynamics – the price of the cryptocurrency fell by 32%.
According to the CoinCodex service, the MakerDAO platform governance token has risen the most in price over the week among mid-cap digital assets. The MKR price rose 27%.
The native cryptocurrency of the Terra ecosystem, LUNA, has dropped in price more strongly than any other. Against the background of the loss of the UST peg against the US dollar, the coin almost lost value.
The total capitalization of the cryptocurrency market has reached $1.4 trillion. The Bitcoin dominance index rose to 42.4%.
The main reasons for the market decline were the short-term destabilization of the stablecoin Terra USD (UST) and the LUNA token and Tether (USDT).
It all started last weekend when UST briefly lost $1. The Luna Foundation Guardian Council has decided to lend $750 million in BTC and $750 million in stablecoins to OTC firms.
On the night of May 10, the event repeated itself, but on a larger scale – UST fell to $ 0.62. Major platforms have restricted trading in pairs with stable money or frozen withdrawals on the Terra network. LUNA’s course began to decline rapidly.
On May 11, the UST fell further – to $0.23, and the LUNA – to $4. Terraform Labs CEO Do Kwon announced measures to stabilize the situation through an additional LUNA issuance to absorb Terra USD (at any given time, 1 UST should be tradable for $1 in LUNA). In parallel, Luna Foundation Guard allegedly tried to raise funds from major market players and failed. Later that evening, the LUNA dropped below $1.
The network began speculating that BlackRock and Citadel funds were involved in Terra’s collapse, but the companies denied the rumors. Later, GAM Holding joined them.
On May 12, Terraform Labs submitted additional measures to stabilize the UST exchange rate to the mechanism proposed by Do Kwon, consisting of the burning of LUNA tokens. At the same time, the Anchor DeFi protocol community suggested reducing the 19.5% rate of return to 4%.
On Friday, the stablecoin dropped to $0.05 while LUNA was well below $0.01. The additional emission of LUNA has exceeded 6.5 trillion coins. Earlier, the Terra project team reported that validators decided to halt the blockchain at block height #7603700 to protect it from potential “administration attacks”. A few hours later the network rebooted and disabled the ability to roll over tokens.
On the morning of May 13, the blockchain stopped working again. The validators explained the move with the need to develop a “recovery plan.” The community began to consider the option to restore the network to its original state. A few hours later the network was restarted with new restrictions.
Do Kwon offered a plan to resolve the situation. He proposed to restart the network with 1 billion coins to be distributed as follows:
The Terra team’s actions were criticized by Binance chairman Changpeng Zhao. According to him, the developers endangered investors, but did not take responsibility.
He then noted that with the network reverting to the time before the collapse of LUNA and UST, a hard fork of the blockchain would not work because the new chain would not have any value.
Activity in the stablecoin segment did not pass by other projects. On a general selling backdrop, Tether (USDT) prices briefly dropped to $0.94 but quickly returned to normal. However, the divergence from the US dollar has resulted in a rate increase in pairs with other stablecoins such as Binance USD (BUSD) and USD Coin (USDC).
Waves-based stablecoin Neutrino USD (USDN) has also lost its peg – the rate is currently down to $0.63.
The TRON DAO Reserve has started acquiring bitcoin and TRON tokens to secure its USDD algorithmic stablecoin. The first purchase of $61 million took place on May 10.
Amid the continued decline in the market, Tron founder Justin Sun saw signs of an impending attack on USDD and pledged to allocate $2 billion to prevent the asset from pegging to the US dollar as it was at the UST.
He also stated that the Tron ecosystem will not give up on USDD. According to him, the Terraform Labs product was ruined by too rapid growth and not enough funds in the reserve fund.
The Terra USD incident was commented on by US Treasury Secretary Janet Yellen. In the Senate Banking Committee sessions, he called for legislation to regulate stablecoins before the end of 2022.
The media learned that Terraform Labs CEO Do Kwon is one of the anonymous founders of the failed algorithmic stablecoin Basis Cash (BAC). Launched in the second half of 2020, the coin relied on arbitrage of the native BAS token to maintain a stable price of $1. A similar mechanism is used for UST.
As a result of another recalculation on May 11, the difficulty of mining the first cryptocurrency increased by 4.89%, reaching a record high of 31.25 T.
Starting this week, a limited number of Instagram users will be able to use NFT as their profile photo. Test takers will need to connect a digital wallet and choose the one intended for viewing on the NFT social platform. No commission is given.
David Markus, former head of the meta-payments division, announced the launch of a new Lightspark company focused on expanding the use of bitcoin. In the first phase, the company assembles a team to study and develop the Lightning Network protocol.
Elon Musk suspended the Twitter acquisition process after the media reported that its social network audience was overstated. According to Reuters, citing a company report, fake or spam accounts “make up at least 5% of daily active users who make money”. According to the billionaire, he is still determined to buy Twitter.
The PancakeSwap DeFi community, powered by BNB Chain, supported the tokenomic changes, the key of which will be to limit the supply of the CAKE governance token to 750 million coins. 98.8 percent of the votes were in favor of the proposal.
By a corresponding decree, Russian President Vladimir Putin was included in the list of verified information on digital financial assets, as well as data on foreign property of election candidates at various levels, cryptocurrencies and tokens. They will be tested for validity.
Kraken is considering offering stock to customers alongside digital assets and NFTs. According to the company’s CEO, Jess Powell, cryptocurrency brokers are moving towards creating “super wallets” that will allow consumers to transact with all assets, including traditional ones.
Also on ForkLog:
For April, we published a monthly industry review that analyzes popular topics and key metrics.
Metaverse has released a series of educational cards about stablecoins, guardianship and non-custodial crypto wallets, as well as MetaMask.
In traditional recaps, we’ve rounded up the week’s main events in the areas of cybersecurity and artificial intelligence.
The decentralized financial sector continues to attract increasing attention from crypto investors. ForkLog has gathered the most important events and news of the last weeks into a summary.
Source: Fork Log
I’m Sandra Torres, a passionate journalist and content creator. My specialty lies in covering the latest gadgets, trends and tech news for Div Bracket. With over 5 years of experience as a professional writer, I have built up an impressive portfolio of published works that showcase my expertise in this field.
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