Is TERRA/Luna kickstarting a new Bitcoin Standard?

[justdimin]

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

I do agree that bitcoin standard in a weird way is established right now but not proven to be working as intended just yet. I mean it could reach to that level eventually but we are not there yet, and if Tera recovers, if the UST is 1 dollar again, and Tera is back to what it was again, then we could say that bitcoin standard has been established there.

I fear that it will not happen, there are too many whales with money who are trying their hardest to make sure that this doesn't happen, and that is a bad thing, but at the end of the day it is not impossible to achieve it even if it takes some time. This is what I am hoping for, if it happens then we are going to be fine.

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[Pejoh Asu]

I do not understand why Terra is almost dead and even stable Terra coins are also valued cheaper, I try to find any information about Terra but it seems that information is only speculation that is the fulfillment of Ust holders so that they sell Ust while Ust enthusiasts continue to decline and make prices corrected by more than 40%.

[icopress]

I do not understand why Terra is [...]

The thing is that Tera has not stopped minting its coin during the last 24 hours.

An issue of 25 billion coins has been added to the existing volume of 3 billion LUNA.

A leveraged hand used insider knowledge to short UST and triggered a bank run. The reason the user had insider knowledge is because they had a detailed understanding of the Terra Ecosystem. Anyone with enough money, knowledge, and motivation could perform this attack, but the number of people capable of doing this is pretty small. Crypto barron or possibly a state actor, but that is speculation.

Long version

The attack was initiated by a liquidity provider who knew ahead of time that (via front-running/public chain observation via bots or other mechanisms) a major transaction (from LFG) moving through the system by paying a generous gas fee (around 34K, I’ll try to find the sources), dumped their UST onto exchanges, and destabilized the liquidity pool. The deviation of peg initiated a bank run, and panic selling at a loss caused the peg to spiral.

Part of the reason that the attacker was able to know about the the transaction ahead of time was because the speed of transactions moving through the system was set quite slow. the passed Agora Proposal has temporarily increased the minting speed which should help with front-running.

Front-running is a core issue here and it is a pervasive problem in many crypto projects. It will need to be addressed in the future, it is perhaps the primary issue that initiated the problem as the sophisticated and leveraged user had “insider information” not widely available to less sophisticated users.

The other problem is that there is no deposit guarantee (think FDIC) in this space. Secondary insurance is available to protect digital assets, but the utility of this is not broadly appreciated by the majority of crypto investors. The reasons bank runs do not occur in the US is not because the reserve backing of USD (because it doesn’t have one), but because the majority of people’s savings are backed by FDIC so even in times of crisis there is no reason to withdraw your money from banks.

It will take some time, but when the UST peg is restored, I suggest a mechanism for ensuring/gauranteeing deposits be explored. It is possible that [Proposal] Terra x Citadel DAO - Accelerating the growth of BTC/4pool is related to this, but unclear at the time. This is theoretically what the LFG was for, but clearly the mechanism is not strong enough and provides no real gaurantee to individuals on the ecosystem.

[Rikafip]

The thing is that Tera has not stopped minting its coin during the last 24 hours.

Yep, and it won't stop anytime soon as they are trying to peg UST to dollar again.

A leveraged hand used insider knowledge to short UST and triggered a bank run. The reason the user had insider knowledge is because they had a detailed understanding of the Terra Ecosystem. Anyone with enough money, knowledge, and motivation could perform this attack, but the number of people capable of doing this is pretty small. Crypto barron or possibly a state actor, but that is speculation.

I just saw an interesting tweet from November 2021 in which one user explained how its possible to break Terra and make shit load of money in the process and all you need to do it is 1 billion usd. And of course having "detailed understanding of the Terra Ecosystem". Do Kwon reaction didn't age well.


Twitter thread: https://twitter.com/FreddieRaynolds/status/1463960623402913797

[philipma1957]

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.

No it was deliberate destruction of a ponzi scheme.

20% interest yeah how that work out. I would like to think it is a true story and luna/ust has been killed.

[Rikafip]

No it was deliberate destruction of a ponzi scheme.

Could be.

20% interest yeah how that work out. I would like to think it is a true story and luna/ust has been killed.

Since I don't trust shitty defi platform with my crypto and never really looked into them, I just found out yesterday that they actually offered 20% apy on UST via Anchor. That alone was a huge red flag and I have no idea how people could think that is sustainable.

[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.

UPDATE, After about 30 hours, I can say that what happen with LUNA is profitable, someone made a lot of money. As for what happened to me:

I deposited $100 USDT to 250 UST and after a few deal I made:

 - $150 USDT
 - 0.00341824 Bitcoin (BTC)
 - 70 USDT eq= 30.64600 US$ (will sold it within 3 hours)

If this was from $100, then there must have been manipulation.

In general, it is difficult for the price to return to $1, so unless something unique happens, I think that the price of both TERRA and UST will go to zero.

[evilgreed]

               Looking at this post now really makes me feel sad. I really liked the concept of Luna and would've invested on it had the price not gone up that fast. I didn't like chasing trends so in a way it is still good, the sad thing is that I am now hesitant to buy Luna right now because of what happened and I am pretty sure that some of the people who were also waiting for good buying opportunities to stack up on Luna are also feeling the same disappointment and distrust. Still, for the sake of speculative potential for profits I might buy a few in the coming days. But not as much as I have previously planned.

[verita1]

It was accidental to find this tweet.
Which is Cobie's response to Justin Sun two days ago:

Cobie
Sir...?
May 08, 2022
justin sun
I am buying #UST. 👀

Do Kwon
Your Excellency what u up to 😳

https://twitter.com/cobie/status/1524042286404759552?t=NR2BfWOHGMjbGqkPJ6opXA&s=19

Follow the thread for more details.👆


Justin recently launched his USDD stablecoin.
It is not for nothing according to the facts that it seems like a fight of stablecoins.

May 09, 2022
I am seeding a #UST/ #USDD pool on @Uniswap! Come and Trade! 👀

https://twitter.com/justinsuntron/status/1523562576944140288?t=o7xF9UVjqpn_2QMnW-nojQ&s=19

As chaos grips the market I came across this tweet. When I saw it I told myself that it was a good strategy to prevent bitcoin from going below 30k. But we need more than that, we must not abandon the market and continue to believe in the true cryptocurrency.
The good thing about this crypto crash is that we gain more investors in bitcoin, people get tired of so many experiments.

May 10, 2022.
To safeguard the overall blockchain industry and crypto market, TRON DAO Reserve have bought 500 #BTC with average price 31031.35 for $15,515,675. #bitcoin

https://twitter.com/trondaoreserve/status/1523919860107202560?t=73d1GquLgL-AsPznxeEQHA&s=19

[LoyceMobile]

The whole idea of a Bitcoin Standard is wrong: with the gold standard, a dollar was worth a certain amount of gold. With a Bitcoin Standard, a TerraShitcoin should have been worth a certain amount of Bitcoin. That would make it just another fake wrapped Bitcoin, so there's no point other than earning money for the creator.
You can't use one thing to peg something to something else.
That means the "Bitcoin Standard" is just as buzz word, typical for money grabbing schemes.

[Dunamisx]

I do not understand why Terra is almost dead

I don't think Luna will make it to live again because it has gone as far below 0.04 as at this morning and many of its investors were already gone with all hope lost about it, the thing is that, they might have  probably sold  the main Terra just to invest on the bitcoin base on anonymous claims, but am sure of one thing, Luna is now a shitcoin and once a coin goes down as this, it does not revive back to initial rate.

[stompix]

The thing is that Tera has not stopped minting its coin during the last 24 hours.

Maduro and Mugabe would be proud of this Do Con guy, how you prop a currency, by issuing another currency and printing millions, selling them to get another coin to prop the coin that was supposed to be pegged by the coins you're selling.
I mean, genius!!!  At the current depreciation levels, it will theoretically take luna only 4 days to reach the levels of inflation the Papermark has managed to do in two years in the Weimar republic.

Justin recently launched his USDD stablecoin.

They will soon run out of letters, the next coins will be USAF, USMC, USSF, and USCG

I don't think Luna will make it to live again because it has gone as far below 0.04 as at this morning

It's below one cent, 0.008.
I find it funny how a lot of bagholders that are screaming now about how this has happened were the same people mocking Warren Buffett on Twitter for being an old fart and not understanding how revolutionary Defi is.

[arallmuus]

In general, it is difficult for the price to return to $1, so unless something unique happens

The fact is that they cant save both Luna and UST, either way one of it needs to be sacrificed and as of now all Luna holders are basically taking the damage for all those minting

I think that the price of both TERRA and UST will go to zero.

Probably not, $0.00001 or something like that perhaps

At the current depreciation levels, it will theoretically take luna only 4 days to reach the levels of inflation the Papermark has managed to do in two years in the Weimar republic.

35b of Luna was minted just today, wonder how many will they mint for the next few days. Well depending on how the whole crypto market will be tomorrow, if the entire market is tanking then they might mint as many as twice of total supply

[tyz]

What we are currently seeing with Luna and TerraUSD is not the first time it has happened with algorithm-based stablecoins. Already a few weeks ago something similar happened with Waves and its stablecoin USDN. The parallels are clear. Terra was mainly backed by Luna and Bitcoin, USDN mainly by Waves. I am now convinced that algorithmically based stablecoins backed by crypto are not really stablecoins. They can be stable, but they can also deviate strongly from the original value and travel the whole crypto market into the abyss.

[CaVO32]

What we are currently seeing with Luna and TerraUSD is not the first time it has happened with algorithm-based stablecoins. Already a few weeks ago something similar happened with Waves and its stablecoin USDN. The parallels are clear. Terra was mainly backed by Luna and Bitcoin, USDN mainly by Waves. I am now convinced that algorithmically based stablecoins backed by crypto are not really stablecoins. They can be stable, but they can also deviate strongly from the original value and travel the whole crypto market into the abyss.

Since they are not pegged into any fiat asset, and just by algo, the movement of this coin for me, is really dependent on the dev team managing it. With its decline, what would be the reasoning that they are telling to people? Whales manipulating its price? We don't exactly know if this is the start of fall of this project. For those holders, better keep an eye of their social media updates and other channels so you will have idea where this coin is heading to. Before they totally exit this market, better sell what you have.

[ajochems]

Many people who had get into the crypto by placing their first investment in Luna.By this many people getting bad impression against the bitcoin.The new people was thinking to inverse on the bitcoin was very sad.Because the price of bitcoin was keep reducing and breaking the new low value.All the crypto market was an bearish market.Kindly avoid to inverse on Luna again.

[fillippone]

The whole idea of a Bitcoin Standard is wrong: with the gold standard, a dollar was worth a certain amount of gold. With a Bitcoin Standard, a TerraShitcoin should have been worth a certain amount of Bitcoin. That would make it just another fake wrapped Bitcoin, so there's no point other than earning money for the creator.
You can't use one thing to peg something to something else.
That means the "Bitcoin Standard" is just as buzz word, typical for money grabbing schemes.

Well, I won't be so sure about this.
What is a BTC on the lightning network? Those are satoshi outside the blockchain pegged to Satoshis on the blockchain. Is a bitcoin on the Lightning Network less a bitcoin than the ones on the blockchain? I doubt so.
Taro, for example, will open a lot of possibilities to enable tokens on the BTC technology. How will be this different from a Bitcoin Standard?

This was the main purpose of this thread, without getting too interest in LUNA's fate. But of course, things in this universe happen often faster than thought.

[hatshepsut93]

Call me a Bitcoin maximalist, but I view all these algorithmic stablecoins as just a new and more elaborate method for scamming investors and traders - we've seen quite enough rugpulls, hacks (that could be just inside jobs), premine dumps, pump and dump schemes. So the fact that some shitcoin project owns a lot of BTC to support the price of their token doesn't mean anything - in the long run they will have to liquidate more and more BTC to support the price. I don't see any reason why would the masses want to adopt this token, and that's the thing that most people ignore - it doesn't matter if a token has web3, NFT, smart contracts, zero fees and all the other stuff that is there to attract investors; without real users such product is doomed.

My comment aged well 

This isn't the first time DeFi and algorithmic token resulted in a disaster, and not the last one.

I don't think Luna will make it to live again because it has gone as far below 0.04 as at this morning

It's below one cent, 0.008.
I find it funny how a lot of bagholders that are screaming now about how this has happened were the same people mocking Warren Buffett on Twitter for being an old fart and not understanding how revolutionary Defi is.

And average crypto enthusiast knows nothing about the technology and how it works, they invest purely on endorcements and popularity of hashtags. The altcoin and token market is just one big HYIP, people just refuse to realize it and still want to believe that it's a legitimate industry.

[_act_]

This isn't the first time DeFi and algorithmic token resulted in a disaster, and not the last one.

That is true, it has not been the first time algorithmic stables coin are like this, they are not stable, if anyone wants to go for a stable coin, it is better to go for the ones that are backed by fiat like dollar, out of the four types of stable coin, algorithmic ones are the worse and they are not stable coins but unstable, not that they are only unstable, they are unstable in a way the price will decrease significantly. I saw TerraUST at $0.9 and it decreased further to $0.7 and them to less than $1, UST which is TerraUSD is now at $0.1638, that is definitely not a stable coin.

[LoyceMobile]

The whole idea of a Bitcoin Standard is wrong: with the gold standard, a dollar was worth a certain amount of gold. With a Bitcoin Standard, a TerraShitcoin should have been worth a certain amount of Bitcoin. That would make it just another fake wrapped Bitcoin, so there's no point other than earning money for the creator.
You can't use one thing to peg something to something else.
That means the "Bitcoin Standard" is just as buzz word, typical for money grabbing schemes.

Well, I won't be so sure about this.
What is a BTC on the lightning network? Those are satoshi outside the blockchain pegged to Satoshis on the blockchain.

Bitcoin LN is not just pegged, it's pegged by signed transactions. But more importantly: it doesn't make any promise about the value in another currency than it's own. That's a crucial difference.

Is a bitcoin on the Lightning Network less a bitcoin than the ones on the blockchain? I doubt so.

Some say it's different, most people seem to be okay with LN.
But that's different than pegging UST to BTC's dollar value. The fundamental problem is that the underlying currency (Bitcoin) isn't stable. You can't ever guarantee stability by using something that's not stable. You could say 1 UST is worth a bottle of beer for all I care, and as long as you have enough bottles of beer in stock, you can guarantee a 1 on 1 swap back. But if it's beer you have, you can't guarantee a bottle of Coke per UST.

Taro, for example, will open a lot of possibilities to enable tokens on the BTC technology. How will be this different from a Bitcoin Standard?

I had to look it up: Taro on lightning.engineering:

We see Taro as an important step in bitcoinizing the dollar, getting the best of both worlds by 1) issuing assets like stablecoins on the most decentralized and secure blockchain, bitcoin and 2) allowing users to transact on the fastest global payments network with the lowest fees, Lightning.

I assume this will use for instance Tether. It sounds like a huge improvement to transfer USDT on LN instead of centralized networks such as Ethereum or Binance. But Tether is pegged to the dollar by keeping a big stash of dollars. That's also debated and doubted: do they really have 79 billion dollars? Let's assume they have: in that case Tether isn't based on a Bitcoin standard, it's based on a dollar standard. Transacting over the LN network doesn't change that, and as long as you trust the company behind Tether, you can use it.

This was the main purpose of this thread, without getting too interest in LUNA's fate. But of course, things in this universe happen often faster than thought.

I'd expect an opposite implementation of the Bitcoin Standard: let's take El Salvador as an example, and let's assume they implement a Bitcoin Standard. Instead of holding 10 tonnes of gold, they hold 19,348 Bitcoin (worth about the same as 10 tonnes of gold). The can now issue banknotes, let's call them ElSalvos, worth 19,348 Bitcoin. If they issue 1 billion ElSalvos, each Elsalvo is worth 0.0193mBTC. At the El Salvador Central Bank, you can exchange your ElSalvos for Bitcoin if you want.

TL;DR: if you want a Bitcoin Standard, forget about dollars