Is TERRA/Luna kickstarting a new Bitcoin Standard?

[LoyceMobile]

I've heard about it before, and I still don't get it: what's the point of using Bitcoin for a stable coin?
In my no doubt limited understanding it works like this: if Bitcoin goes up, the company makes a profit. If Bitcoin goes down, they're short on money. Who would invest in this if they'll only take the risk but not the profit?

I called it. It didn't take long to actually happen.

Stable coins are not in the interest of Bitcoin users.

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[fillippone]

Wow.

That was fast. I honestly didn't expect this drama to unravel so fast. Yet we are here discussing algorithmic stablecoins that needed, multiple interventions to stabilise their price.

Just look at this:


The green slice represents the portion of LFG stash that is currently invested in BTC: correct, you can't see one.

I will later post a couple of post mortem analyses of what has just happened.

[stompix]

The green slice represents the portion of LFG stash that is currently invested in BTC: correct, you can't see one.
I will later post a couple of post mortem analyses of what has just happened.

You little rascal  I'm laughing so hard, on that one, I wasn't even looking at the graph as I doubt at 1 am I can grasp what would those numbers mean but when I read, yeah don't look it ain't there I laughed for 5 mins 

Early on I was browsing the Twitter feed from luna and god, there is such an unload of denial and copium there, every fleeced or near to be fleeced "investor" screaming how somebody destroyed this because it was threatening them...How in world does that even work? You've got destroyed by the ones that you threatened with your financial mumbo jumbo?

Meanwhile, Luna:



They are looking for full stability I guess, nothing is more stable than zero after all, no matter how you spin it or how you look at it is still zero!

Btw, I guess that by now the answer to the title is no, right? 

LE
Wait a minute:
https://bitinfocharts.com/bitcoin/address/bc1q9d4ywgfnd8h43da5tpcxcn6ajv590cg6d3tg6axemvljvt2k76zs50tv4q

Did they empty the whole address? Do they have zero coins left?

Profit from price change:   -489,356,486.9 USD

Wtf!!!!!!

[Paul Pogba]

I was surprised by the price of LUNA which dropped more than 50%, when it was often trending on social media it made me interested in buying LUNA early this month, unfortunately the red and LUNA markets became coins that dropped significantly, even that surprised me the stability of LUNA coins too drop 10% and haven't recovered until now.

[Rikafip]

Early on I was browsing the Twitter feed from luna and god, there is such an unload of denial and copium there, every fleeced or near to be fleeced "investor" screaming how somebody destroyed this because it was threatening them...

It's much easier to swallow up the loss if you think that there is some big conspiracy targeted at you just because you are so good instead accepting the simple fact that someone exploited their flawed mechanism in order to make shit load of money. Like we haven't these things happen before..

Meanwhile, Luna:

Hah, $13 was a good price, now it's below $8 with plenty of room to go down even more. Couple of my buddies decided to gamble and started buying at sub $10, hoping for a dead cat bounce, will see how that plays out.

[Wind_FURY]

It is Do Kwon's fault if the Fed, and other government entities, step in and start another round of bans, regulations, and government FUD, causing Bitcoin to crash under the 200-weekly SMA line currently $21,843.85 right now. FACT.

Plus which of those other shitcoin protocols are "HODLing" UST/LUNA in their reserves/treasuries? They will DIE.

[LoyceMobile]

Wait a minute:
https://bitinfocharts.com/bitcoin/address/bc1q9d4ywgfnd8h43da5tpcxcn6ajv590cg6d3tg6axemvljvt2k76zs50tv4q

Did they empty the whole address? Do they have zero coins left?

Profit from price change:   -489,356,486.9 USD

Wtf!!!!!!

I'll admit I didn't care enough to follow this closely, and it feels like adding insult to injury, but did they really have 42,530 Bitcoin to "back" their "stable" "coin"? It just dropped under $0.30!

So let me get this straight again: they had 42,530 Bitcoin to "back" their made-up "stablecoin", and to keep it stable, they have to sell Bitcoin when Bitcoin drops. Selling tens of thousands of Bitcoin means Bitcoin drops further, which means the more they sell, the lower their "stablecoin" gets! That's as dumb as it gets!
Who thought this was a good idea?

[hugeblack]

In the coming days we will hear more in-depth analyzes, especially since I see it as a trend on twitter, but we can't in any way view it as a failure of the "new Bitcoin Standard" backed by Bitcoin? The question that is on my mind now

can we consider what happened to be price manipulation? Or at least TERRA/Luna cheated?

I mean the last sale:

Terra #LUNA has purchased an additional 37,863 #Bitcoin ($1.5 billion) for its reserve.

Which was sold less than a week later at a price of 30k.


The good side of the story is the ease with which Bitcoin can liquidate even in the event of a price crash, which is a good thing in the long run.

[fillippone]

Who thought this was a good idea?

I honestly did. We have many reserves to “scare” attackers trying to depeg the stable coin.
But I underestimated human greed: if there is a profit easy to be made, someone will inevitably try to yield that.
So, this mechanism was challenged and failed miserably.

Someone made a good profit, and someone lost a lot of money; this was inevitable and of no interest to me.

What I want is: lessons learned.
I think we need some kind of scaling solution. Probably one distant day it will be possible to have a stablecoin in LN using Taro. But in the meantime, we have to work with what we have available.

Anyway, the amount of research is amassing on my “desk” and I am lagging.

[hugeblack]

UPDATE, I just converted my $100 USDT to $250 UST, and it's my first time buying a "stable coin" because of the fluctuation.

Let's hope this will be a lesson for those trying to make a quick profit by adopting a "stable currency" and beginning to develop a better model.
Now if it goes back to $1 levels, this is a $150 profit. I hope that happens quickly.

[LoyceV]

can we consider what happened to be price manipulation?

According to this post, someone earned hundreds of millions of dollars from shorting by manipulating UST and it's "backing". I don't know if it's true.

Who thought this was a good idea?

I honestly did. We have many reserves to “scare” attackers trying to depeg the stable coin.
But I underestimated human greed: if there is a profit easy to be made, someone will inevitably try to yield that.
So, this mechanism was challenged and failed miserably.

It's not only caused by greed, from what I understand the mechanism could only work if Bitcoin's value went up.
Say you have $10, and you buy Bitcoin to guarantee your made-up stable coin keeps it's value. If Bitcoin goes to $100, you have $90 to spare (and potential profit), but the moment Bitcoin drops, you're short on money. You could improve this by buying $20 in Bitcoin to guarantee the stability of $10 in your stable coin, but if Bitcoin drops more than 50%, you're short on money again. You could go further and keep $100 in Bitcoin to guarantee $10 worth of stable coins, so that you can handle a 90% drop in price, but that would mean you'll be forced to sell 90% of your Bitcoin just to keep $10 worth of stable coins alive.
I can't think of any logical way for this to work.

Now if it goes back to $1 levels, this is a $150 profit. I hope that happens quickly.

This actually makes me consider shorting it: there's an upper limit to the risk, but it's quite likely to drop to nothing, which would give a decent profit.

[Rikafip]

According to this post, someone earned hundreds of millions of dollars from shorting by manipulating UST and it's "backing". I don't know if it's true.

The article that is shared in that post is based on this tweet and even that guy said at the end that there is a lot of speculation and assumptions in his scenario how all this played out. But yeah, point of all this was obviously for someone to exploit their faulty mechanism and make money no matter the details how it exactly happened.

And for the reply guys, yes I know a lot of this involves some speculation & assumptions.  But a lot of money was made here either way, and I thought it would be cool to dive into how they did it.

I can't think of any logical way for this to work.

UPDATE, I just converted my $100 USDT to $250 UST, and it's my first time buying a "stable coin" because of the fluctuation.

Let's hope this will be a lesson for those trying to make a quick profit by adopting a "stable currency" and beginning to develop a better model.
Now if it goes back to $1 levels, this is a $150 profit. I hope that happens quickly.

Good luck with this. Couple of my friends decided to gamble with LUNA and UST earlier today and they are getting rekt.


So far this has been the fail of the year and it won't be easy to top it.

[fillippone]

So far, this has been the fail of the year, and it won't be easy to top it.

We are in May only, plenty of time to nominate something for the Fail of the Year award in Community Award for 2022.

[d5000]

I just stumbled again upon this thread and was thinking ... well, maybe Terra is about to kickstart a new Bitcoin standard, but in a different way?

While Bitcoin took two short dips (one a bit more substantial) under 30K due to the Terra/Luna fiasco, it was hit much less than I expected, taking into account that >50.000 BTC seem to have been sold by LFG alone (correct me if I'm wrong). But now Bitcoin's again at the same price level than before the issue.

So Bitcoin, even in some very adverse situations, seems to be more stable than even a big stablecoin. It's likely that once the final TUSD/Luna crash became apparent, a lot of money could have been moved into Bitcoin because it seemed the "less worse" of all coins (excluding exchanges which offer "true" fiat money and not only stablecoins).

I'm pretty convinced that if Bitcoin doesn't take again a very deep crash in the next days, it will come out strengthened by this episode. People may be looking more critical at centralized stablecoins and will instead, if they're gambling with altcoins, be more lenient to convert their profits into BTC, like it was popular before stablecoins became ubiquitous, and Bitcoin becoming again the "standard" of the crypto world

[LoyceV]

While Bitcoin took two short dips (one a bit more substantial) under 30K due to the Terra/Luna fiasco, it was hit much less than I expected, taking into account that >50.000 BTC seem to have been sold by LFG alone (correct me if I'm wrong). But now Bitcoin's again at the same price level than before the issue.

Where did those Bitcoins they sold come from? I guess from people who were hoping to make a profit by "investing" in their shitcoin? How come so many people are still so gullible/greedy after all those years of ICO scams and premined shitcoins?

[Rikafip]

We are in May only, plenty of time to nominate something for the Fail of the Year award in Community Award four 2022.

True, plenty of time left but it will have to be spectacular to be bigger fail than this. Then again, knowing how unpredictable crypto market is, nothing is impossible.

How come so many people are still so gullible/greedy after all those years of ICO scams and premined shitcoins?

Because there is constant influx of new people, while older ones that went through 2017 ICO boom and are still buying shitcoins like LUNA are nothing but degenerate gamblers.


Theories on what really happened today are popping all over the internet, this is another one I stumbled upon in one Discord group. Dunno if it really makes sense but here it is:

Blackrock and Citadel borrowed 100K BTC from Gemini (it appears in their loan book). They swapped 25K of that BTC into UST; this was all done quietly in anticipation of the attack. When the time was right, they called up Do Kwon at Terra Foundation and said they wanted to sell a lot of BTC for UST. As it was a large trade they told him they didn't want to move the market and asked if he would like to buy their large block of BTC at a discount for UST. Do Kwan took the bait. He gave them a huge chunk of UST, thus lowering the UST liquidity significantly.

At that point, Blackrock/Citadel dumped all of the BTC and UST causing massive slippage and triggering a cascade of forced selling in both assets. The real problem was Blackrock/Citadel knew that Anchor, which holds a lot of LUNA, was a Ponzi scheme (they offer 20% staking APY for Christsake) and this crash would trigger more withdrawals than Anchor can repay. These forced withdrawals and selling would trigger a massive selloff in Luna, thus further breaking the $1 peg and wrecking the market further. Blackrock and Citadel can now buy the BTC back cheaply to repay the loan and pocket the difference. Meanwhile, billions of longs and Bitcoin VaR were wiped out.

This was pure market manipulation.

[stompix]

I just stumbled again upon this thread and was thinking ... well, maybe Terra is about to kickstart a new Bitcoin standard, but in a different way?

Yeah, the new standard will be Bitcoin and Bitcoin alone  
Seems like some shitcoins are so flawed that even backing them with bitcoin means nothing, now imagine the ones that don't have even that!

The article that is shared in that post is based on this tweet and even that guy said at the end that there is a lot of speculation and assumptions in his scenario how all this played out. But yeah, point of all this was obviously for someone to exploit their faulty mechanism and make money no matter the details how it exactly happened.

This is always the thing after something goes totally wrong we know in perfect detail which step how and when, but if anybody had asked previously if this shit would be possible all the experts would have come shouting about algorithms liquidity pools, how everything is impossible. When it comes to bitcoin all day long everyone is concerned about 51% because you only need x amount of gear to do it but look how easy this happened and none of the experts figured it out before it actually did.

LE:
My bad, there was one
https://twitter.com/FreddieRaynolds/status/1463960623402913797

But I love the new mantra of the one's fleece by this, it was the evil gubbermint that did it!  

We are in May only, plenty of time to nominate something for the Fail of the Year award in Community Award for 2022.

Unless some coin manages to get negative, it's damn hard to topple 100 cents= 20 cents

[fillippone]

Theories on what really happened today are popping all over the internet, this is another one I stumbled upon in one Discord group. Dunno if it really makes sense but here it is:

I just came across this exact quote, translated in Italian, also cited without source, so I guess it's from Discord.
Worth trying to find some evidence of this, as the story would make sense in many ways.

[odolvlobo]

Theories on what really happened today are popping all over the internet, this is another one I stumbled upon in one Discord group. Dunno if it really makes sense but here it is:

... <A bunch of totally unsubstantiated BS> ...

Basically you are claiming that Blackrock and Citadel sold BTC and UST at a huge loss hoping that they could turn it into a gain by buying it back at a lower price.

I would avoid repeating ridiculous stuff like that. It makes you look stupid.

[Rikafip]

Basically you are claiming that Blackrock and Citadel sold BTC and UST at a huge loss hoping that they could turn it into a gain by buying it back at a lower price.

Where the hell did you see me claiming anything in that post? Read my post again and you may notice that I simply shared one of the theories that I've seen circulating around and that's about it.