A look at Do Kwon's algorithmic stablecoin UST, designed to trade at $1 but which has been in freefall; CoinMarketCap says there are ~14.8B UST in circulation
Earn ~21% on DFX Finance's EURS/USDC pool! Liam ‘Akiba’ Wright / CryptoSlate : Luna Foundation Guard close to announcing recovery plan for TerraLuna, UST Osato Avan-Nomayo / The Block : Korean crypto exchanges issue warnings about trading Luna Joseph Hall / Cointelegraph : Terra founder Do Kwon shares plan to save the UST stablecoin peg David Gerard / Attack of the 50 Foot Blockchain : Terra's stablecoin does its own 2008 crisis — UST crashes and takes Bitcoin with it Jon Southurst / CoinGeek : LUNA and UST crashed again, raising questions about stablecoins Blog Tien So : TerraUSD Stablecoin lao xuống dưới $ 0,95 LOL's Newsletter : 2022年5月11日 （三）AM George Georgiev / CryptoPotato : Here is What Happened to LUNA and Why the Price Can Continue Crashing Charles Thuo / CoinJournal : The price of LUNA falls massively after the UST de-pegged from the US Dollar Tolu Ajiboye / Coinspeaker : Controversial Dollar-Pegged Stablecoin UST Crashes 60% to 35 Cents Tweets: @stablekwon : Close to announcing a recovery plan for $UST. Hang tight. @stablekwon : Deploying more capital - steady lads @stablekwon : 1/ The LFG Council just voted to deploy 1.5B in capital (0.75B in BTC, 0.75B in UST) to allay market concerns around UST. Some more context on why and how: https://twitter.com/... Frank Chaparro / @fintechfrank : “Do Kwon, the CEO of Terra creator Terraform Labs, was one of the pseudonymous co-founders behind the failed algorithmic stablecoin Basis Cash, CoinDesk has learned.” https://www.coindesk.com/... @sbf_ftx : Just as the outside view skeptics predicted, during a large market move a stablecoin blew out. Just not the stablecoin they predicted. Which was predictable, if you knew the details. This isn't a comment about good vs bad—it's about how important it is to know the details! @livercoin : Do kwons recovery plan : “Hey guys, so we are stepping away from Luna, obviously it was a failed experiment but we are going to use the rest of the assets to fund our new panda nft collection!” @livercoin : Jokes aside now If Do Kwon can put together at least a little bit reasonable plan to save the ecosystem without destroying $LUNA, it's most likely going to pump like 500% from here. Because right now it's pure panic, capitulation and greed from bears. https://twitter.com/... @crypstax : trust the code they said 🤨👇😡 #UST #LUNAtics https://cointelegraph.com/... @0x_b1 : One Do Kwon tweet and we see this green candle.... He has more influence on the crypto markets than even the infamous @elonmusk ! Wonder what happens when he actually announces the recovery plan! https://twitter.com/... https://twitter.com/...
Context & Ripple Effects
UST’s break from parity had already deepened to $0.60, prompting the Luna Foundation Guard to deploy $1.5 billion of BTC and UST reserves in an attempt to support it. The subsequent continued plunge in both UST and LUNA shows that the reserve intervention had not restored confidence.
With roughly 14.8 billion UST still circulating, the episode is a live test of whether Terra’s mechanism can maintain a dollar peg during a broad withdrawal of demand.
First-order effects
- UST holders face losses relative to the intended $1 value, while LUNA absorbs the immediate strain of the failed peg; Korean exchanges have issued trading warnings for LUNA.
- Luna Foundation Guard and Do Kwon are pressured to turn their proposed recovery plan into a credible route back to parity after the earlier reserve-backed support effort.
Second-order effects
- The UST selloff contributes to a wider crypto-market retreat that affects Bitcoin, extending the disruption beyond Terra’s own tokens.
- Rival algorithmic stablecoins are forced to contend with declining confidence in their pegs, while USDT and USDC’s relative stability becomes a point of comparison.
Third-order effects
- If the pattern of post-UST de-pegging persists, stablecoin users and trading venues are likely to distinguish more sharply between algorithmic designs and tokens supported by other reserve structures.
- The failure highlights a structural trade-off in programmable settlement: a peg mechanism’s credibility depends on how it performs under redemption pressure, not only on its stated dollar target.
The trend: UST is part of a broader sorting of stablecoins by how reliably their peg mechanisms hold during market stress.