What is the real reason for the collapse of the stable UST currency? And you’re going to get it back?

The stable UST currency, which has $18 billion in market value, has lost its peg to the dollar in the chaos associated with stable algorithmic currencies; what is the real reason for the collapse of the UST currency? UST is a stable dollar-pegged currency that has been delinked twice in the past few days; the UST currency has collapsed and is now hovering around $0.45 per piece.

A simple explanation of how UST works can always recover $1 luna for every dollar in UST and vice versa. If LUNA is priced at $50, you can replace the piece for $50. Similarly, you can replace 50 UST currencies for 1 LUNA currency.

Important: It should be noted that you can always exchange 1 piece of UST currency for $1 LUNA, even if the UST currency is priced below $1.


This was supposed to be a stabilization mechanism if the UST currency collapsed to $0.99, and the bolt traders could buy it and replace it for $1 LUNA.
We all know that stable currencies require a guarantee to maintain demand and defend the currency’s association with the dollar. Where does UST get the warranty? This is done with anchor protocol intervention is (nominally) a financial market that pays you 19.5% for Stacking’s work on the UST currency. There is a large proportion of the UST currency in circulation in anchor protocol, currently only 40%, but it has reached 70% + historically.

But what might push you to buy and keep UST currency? That’s easy! Because they pay you 20% a year for keeping it.

There are two important questions:

First, if there is something that pays you 20% without risk, why not borrow a lot of money and make it pay you 100%+? That’s exactly what Degenbox did by Abracadabra Money.

Degenbox and the rest of frog Nation DeFi were dissolved in January, unlinking UST to US dollars and sending LUNA currency from $100 to $46.

Second, how do you give someone 20% of the free money every year?!

Well, that’s thanks to LFG, the supervisors of the multi-billion dollar Terra Ecosystem Fund. We’ll get back to that later.

First, we need to know what the luna code does for every UST currency in circulation that reduces LUNA displays. The winning scenario here is that LUNA is burned against UST, i.e., the more UST, the more LUNA, so investors should want to get LUNA.
If there is a huge demand for UST, and you are the last LUNA holder on earth, you will have tremendous recovery power. That’s why if the LUNA Cap market is smaller than UST Cap Market, FUD will happen.

It doesn’t matter what luna’s implied total value matters is the marginal value of each LUNA recovered against UST, or vice versa, but what is more important is the direction and stability of luna’s price.

It’s a very big problem if the average LUNA versus UST refund price is high relative to luna’s current price. Let’s explain this:

  • Luna’s price is high.
  • LUNA and UST are burned.
  • Luna’s price drops.
  • UST is refunded against LUNA.

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