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Terra’s LUNA Declines 10% Amid UST Depegging Concern

Posted by Ekin Genç on Monday, May 9, 2022 Under: Technical Analysis

Although a 1% depeg from $1 isn’t unusual for stablecoins when markets are under pressure, in the case of UST, it’s been more than 16 hours.

Terra’s native token, LUNA, since yesterday has plummeted about 10% to $65.80 on fears that Terra’s stablecoin UST, propped up mainly by LUNA, may lose its peg.

Stablecoins are cryptocurrencies pegged to fiat currencies such as the U.S. dollar on a 1:1 basis. Depegging refers to stablecoins going above $1 or, more commonly, below $1.

UST fell as low as $0.985 on Saturday, and it’s now trading for $0.99. Although a 1% depeg from $1 isn’t unusual for stablecoins at times of intense market pressure, the parity is often restored quickly. In the case of UST, it’s been more than 16 hours.

Some critics say this highlights UST as a liability for the wider cryptocurrency market as the Luna Foundation Guard, the organization that backs UST, has $3.5 billion in bitcoin ready to sell as a last resort should it need to defend UST’s stability. LFG reserves are in BTC (93%), LUNA (3.5%), and AVAX (3.5%).

The pressure on UST began to mount after the past few days saw high-volume withdrawals from Terra’s Anchor Protocol, where UST deposits currently earn investors 18.8% APY. Although it’s unclear what led to the withdrawals, it could be the bearish turn in the broader market.

In : Technical Analysis 

Tags: terra’s luna declines 10% amid ust depegging concern 

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