terra defi 18b yoy binance

Summary:

  • Terra’s UST has depegged from the one dollar mark after massive selling of the stablecoin on Curve Finance and Binance
  • The selling was to the tune of $285 million in UST and resulted in a $2.25 billion outflow of the stablecoin from the Anchor Protocol
  • UST has since stabilized to the $0.996 price level
  • Do Kwon has expressed optimism that UST will remain resilient despite the event

In the last 24-hours, Terra’s stablecoin of UST has depegged from the one dollar mark due to what the team at Curve Finance describes as ‘selling en masse’.

According to the analysis shared by Curve Finance via Twitter, someone started selling massive amounts of UST, resulting in the depegging.


However, this did not sustain for long, leading the overall asset class to deflate by ~50% over the course of H2 2019.

Although Bitcoin failed to meet expectations set by the excitement garnered by 1H19’s run-up to $13k per BTC, the asset class overall is once again the best performing for the year, returning +90% beginning to end, whereas the NASDAQ returned +38%, the S&P +31% and REITs +27%.

Be that as it may, the sentiment among market participants – at present – is much bleaker than the absolute YoY performance implies, reminding us that biases are omnipresent in how sentiment manifests in markets.

The most forward thinking of the largest allocators are already getting smart in and around the asset class, primarily via allocating to Venture Capital [7], while some have started dipping their toes in direct token purchases.

The last but perhaps most important piece of the puzzle for top down adoption is regulatory clarity – or, at present, lack thereof. Bitcoin’s Q2 ascent was accompanied by the announcement of Libra – Facebook’s blockchain-based stablecoin initiative, that would – upon launch – bring digital wallet infrastructure to Facebook’s massive user base.

Libra’s launch was soon put on hold by US lawmakers, with both Mark Zuckerberg and David Marcus (Libra CEO) having to undergo multiple rounds of hearings in front of the US Congress and Senate.

However, this did not last long as UST’s peg was soon restorned.

News of Curve Wars 🌈⚔️

Yesterday, someone started selling UST en masse, so it started to depeg. However, that was met with a great resistance, so the peg was restored.

To get enough USD for that, a lot of ETH and stETH were sold also.

Aftermath? High Curve trading vol (uni3) pic.twitter.com/ZChdZiVzcK

— Curve Finance (@CurveFinance) May 8, 2022

Was it an Attack on UST?

Crypto-twitter community members also noted the depegging of UST, with @CaetanoManfrini speculating that it might have been deliberate and coordinated with the perpetrator(s) selling on both Curve Finance and Binance. He said:

today’s attack on Terra-Luna-UST was deliberate and coordinated.

In this case, it is an anchoring bias, a recency bias and loss aversion in full effect [2].

As Bitcoin descended from July highs for most of 2H19, the trade war fears were dispelled and under the onlook of a dovish Fed, the Dow and the S&P both broke to new all-time highs. Considering the developments within the world of cryptoassets, we are – quite frankly – dumbfounded by the weak sentiment.
While being cognizant and appreciative of the limitations of cryptoassets and the challenges that lie ahead, we cannot help but continue to be optimistic about the medium and long term prospects of the asset class.

2019: a year of quiet infrastructure development

Our thesis has always been that there are two forces that charge adoption prospects for cryptoassets; 1. top-down adoption by institutions and legacy finance, and 2.

Bottom-up

Even in the face of structural uncertainty, in 2019 the builders have been hard at work and their labour is already bearing fruit – with Ethereum (#2 public blockchain and #1 smart contract platform by market capitalization) the clear leader in attracting developer interest. Ethereum has been a hotbed for developer activity, with Open Finance (or DeFi) use cases finding notable traction.

There are now stable value issuers (e.g.
Maker DAO), loan facilities (e.g. Compound), market makers and exchanges (e.g. Uniswap, Kyber) and derivatives facilities (e.g. Synthetix) that are fairly well established, while we are seeing use cases in insurance (e.g.
Nexus Mutual), interfaces (e.g. Zerion), and payments (e.g.

Additionally, the money and finance related indices have strongly outperformed all other clusters in 2019 – a clear indication of where product/market fit can be found at present and how much it matters to the market.

Some of the areas that we are excited by within the cluster, are synthetic asset solutions that will reduce collateral ratio requirements, allow for legacy assets (e.g. equities) to be printed on chain and transacted at a fraction of the cost of traditional brokerages, enable new forms of hedging risk for crypto native businesses (e.g. hashrate derivatives) and – well – new forms of leverage. After all, given the early stage we are currently in, speculation largely remains the main use case.

Concurrently, in 2019 we saw glimpses of the rise of domain specific chains.

Massive 285m UST dump on Curve and Binance by a single player followed by massive shorts on Luna and hundreds of twitter posts. Pure staging. The project is bothering someone.on the right path!

According to the team at WuBlockchain, the depegging resulted in a ‘net outflow of about 2.25billion [from the Anchor Protocol] in the past two days.’ The outflow of UST from Anchor also broke a single-day record of $1.299 billion yesterday, May 7th.

Furthermore, the amount of UST on Anchor has fallen by 17.93% since the depegging event.

Do Kwon Expresses Optimism that UST Will Be Resilient as it Resumes its Peg

At the time of writing, and according to Coinmarketcap, UST is trading at $0.996, indicating that it is on a path toward stabilizing.

The depegging of UST also caught the attention of the founder of Terra, Do Kwon.

Mr.

Trust is the 4th most popular equity amongst Millenials in their customer base – more popular than Netflix or Berkshire Hathaway [5].

As progress in data pipelines is made and liquidity improves, the uncertainties around the asset class will become increasingly less, at which point we expect to see the development of products that will make Bitcoin’s inclusion into ISAs (Individual Savings Account) and IRAs (Individual Retirement Account), a matter of routine.

While we do not believe that this will become commonplace in 2020, we do believe we will see material progress in that direction, both in regulations, and in market structure/infrastructure.

Once that milestone is cleared, and the asset class has grown sufficiently to become even more generally accepted, the probability of it being included as an asset of pension funds and endowments increases dramatically.

Web 3.0 and Open Finance innovations and primitives by the general public. 2019 was a year of steady infrastructure development and deployment in both of these areas.

Top down

2019 saw a continuous stream of innovation in institutional infrastructure, with cornerstone products such as digital asset custody and derivatives being delivered and further developed from both legacy players such as Fidelity, ICE and the CME [3], as well as crypto native players such as Coinbase, BitGo and Binance [4]. These advances are bringing mature and trusted prime brokerage solutions closer to the cryptocurrency industry, and will enable the deployment of ever more complex strategies at scale, while simplifying the complexity at the base layer of this technology, head-on.

USD in loans, payments and collateral value in 2019 [10].

Over the course of 2019, Ethereum became a lot more expressive. There are now more frameworks, IDEs and mature blocks of value within Ethereum that can be used as references for new applications, enabling developers to deploy a wider array of features, faster than ever before.

Given the product/market fit that the category is showing, Ethereum’s lead in developer mindshare and maturity of tooling, but also being cognizant of the platform’s scaling and governance limitations , we believe this to be the space where most value will be created and captured in the next 2-3 years.

It is indicative that in an indexing exercise exploring 2019 returns, DeFi has been the standout performer, primarily driven by the mercurial H2 performance of Synthetix (SNX) – a 30x run.

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