The decoupling of UST from the value of $1 is the main news of the week, which also led to an intensification of the collapse of the coin market. At the peak of the slump, the Stablecoin was down as low as 4 cents, even though it should be valued at 25 times that. And if investors dumped their holdings of the coin at the bottom, they suffered a serious financial loss.

Record and anti-record UST value

Against the backdrop of what was happening, investors began to fear a repeat of a similar situation with USDT from Tether. However, as explained by a representative of the project, their stabelcoin is not algorithmic, but asset-backed. Accordingly, at least the same scenario will not affect it. Read more about this in a separate article.

Problems in cryptocurrencies

According to a Binance executive, Terraform Labs representatives have failed to provide the exchange with a coherent report on their actions in relaunching the LUNA network. Here’s his quote, in which he shares his take on what’s happening.

We have asked their team to rebuild the network, burn the previously issued LUNAs and restore UST parity to the dollar. So far we have not had any positive response and there is no communication at all.

Zhao makes it clear that the timely burning of LUNA for the right amount could have saved the UST situation - at least that action seems more logical now. However, the developers have been slow to come up with an adequate solution. Moreover, the blockchain has stalled several times, making users unable to withdraw tokens from exchanges and at the same time losing faith in the project.

Changpen Zhao compared what happened to the Axie Infinity blockchain game hack that happened in March 2022. More specifically, the Ronin protocol, which is closely linked to the Axie Infinity ecosystem, was hacked. At the time, the hackers managed to steal around $622 million. However, the project team reacted very quickly and did everything they could to minimise the damage. Zhao continues.

This is a strong contrast to the incident around Axie Infinity, where the development team took responsibility, had a plan and actively communicated with us. We helped them out.

Terra founder Do Kwon

According to Decrypt’s sources, the Terra ecosystem consists of its own LUNA token and UST stackablecoin. UST is an algorithmic stablecoin driven by smart contracts, and LUNA acts as an “arbitrage cushion” to help UST maintain its peg to the dollar. Users can exchange LUNA for UST worth $1 and vice versa. If the price of UST rises above the peg, traders can exchange LUNA for $1 UST and sell the newly issued UST at a profit.

That is, in essence, the developers were betting that the situation would be balanced by the users of the tokens themselves. However, as a result, it is that component that has failed and led to the current dire consequences. For example, as we know, famous rapper KSI lost millions of dollars on LUNA, although he bought the coins after the collapse.

The fall of LUNA

This week, the discrepancy between the UST exchange rate and the dollar increased significantly and the parity support algorithms collapsed. The situation was exacerbated by the fall of LUNA to almost zero. As a result, some cryptocurrency exchanges, including Binance, were forced to temporarily suspend token trading. And trading platform Woo X has delisted LUNA, which means it got rid of it and closed transactions. Obviously, this was the right decision for the safety of users.


It should be noted that Binance, for its part, only suspended trading LUNA and UST, as confirmed on Twitter by Changpen Zhao, motivating the decision by concern for the traders. However, trading was restarted three hours later. How this fits in with the concern and desire for investor safety is unclear.

Changpen Zhao, CEO of Binance


We think the dissatisfaction with the Terra team's actions is well-deserved. Investors especially don't like the lack of transparency about management's actions with the bitcoin reserves they have been actively accumulating. Do these reserves exist - or have they already been sold off? We'd like to believe we'll get an answer after all.

Will the Terraform Labs team be able to rebuild their image? Follow developments in our millionaires’ crypto-chat. There we discuss other events and enjoy the latest memes.