Crypto Twitter was already operating on all cylinders yesterday, as Bitcoin and other top cryptocurrencies plummeted toward lows not seen in over a year. Then Terra’s stablecoin, UST, fell off a cliff, and the social media platform whirred into overdrive.
UST, designed to hold at the value of the U.S. dollar, fell from a concerning $0.985 to a shocking $.90, then to $.85, then to $.80, then even lower. As the once-stable coin fully depegged from the U.S. dollar, dropping below $.70 late Monday, Crypto Twitter’s resident experts, stakeholders, contrarians, and trolls were all there to process the historic calamity in real-time.
Questions abounded as UST began, and then continued, to plummet: How could a stablecoin become so … unstable? Why hasn’t it stopped? Why did this happen to UST and not other stablecoins tied to the dollar?
Aztec’s Jonathan Wu provided a clarifying crash course that analyzed the depegging in real time.
An $18 billion stablecoin is losing its dollar peg with all the magical chaos of algorithmic stables, with a dash of Bitcoin systemic risk drama.
Here’s everything you need to know.
The $UST Depeg Thread:
— jonwu.eth (@jonwu_) May 9, 2022
As with any tribulation filtered through Twitter, reactions to UST’s collapse garnered heapings-on of both concern and smug amusement. Some, like Ryan Selkis, founder of Messari Crypto, warned the implications of the day’s events could spiral far beyond Terra’s success or failure.
If Terra fails, it’s half the size of Enron, so maybe hold off on the shadenfreude while we’re on the edge of the regulatory abyss.
— Ryan Selkis 📖 🖊🔑 (@twobitidiot) May 10, 2022
In addition to financial consequences, Arthur Breitman, founder of Tezos, predicted a backlash in public perception for all crypto stakeholders.
I would also say that people will look at this and think crypto is generically bad. It doesn’t help that large parts of the industry praised it as innovative.
— Arthur B. 🌮 (@ArthurB) May 10, 2022
Twitter’s crypto citizens gripped their screens as UST fell lower and lower, every hour bringing a new, unheard-of reality. As observed by crypto journalist Laura Shin, what was apocalyptic at 5 p.m., was a miracle by 6 p.m.
Hilariously, UST is now at $0.79 now and I feel relieved, whereas 35 minutes ago, when it was at $0.75, I was horrified 🤔😂
— Laura Shin (@laurashin) May 10, 2022
But for all the panic surrounding the day’s events, industry leaders claimed to be unfazed. Sam Bankman-Fried, founder of FTX, argued the collapse of a stablecoin was a long time coming.
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!
— SBF (@SBF_FTX) May 10, 2022
And Mark Cuban postulated that the seemingly unprecedented moment in crypto history actually rhymed with the early-2000s growing pains of Web 2.
Crypto is going through the lull that the internet went through. After the initial surge of exciting apps, NFTs, DeFi, P2E, we saw the imitation phase as chains subsidized the movement of those apps to their chains (ala bandwidth and storage subsidies by startups in the 2000s)
— Mark Cuban (@mcuban) May 9, 2022
Avalanche co-founder Emin Gün Sirer even argued the event had precedent within the context of crypto and stablecoins.
Even fully-collateralized fiat stablecoins have depegged. Even some of the weak algo stablecoins have recovered.
Some thoughts. 🧵👇
— Emin Gün Sirer🔺 (@el33th4xor) May 10, 2022
Nonetheless, such contextualizing didn’t stave off the many denizens of Crypto Twitter wary of Terra co-founder Do Kwon’s very public, real-time handling of UST’s disintegration. As Kwon live-tweeted Terra-supporting Luna Foundation Guard’s (ultimately unsuccessful) efforts to loan billions to shore up the stablecoin, some couldn’t help but point out the naked inconsistencies exposed by the strategy.
And, because it’s Twitter, some couldn’t help but leverage the moment for a little sweet revenge. Charles Hoskinson, founder of Cardano, resurfaced an old tweet in which Kwon made a passing comment about buying ADA, Cardano’s cryptocurrency, for negative correlation with Terra’s own coin, LUNA (implying that ADA’s decline was a natural byproduct of LUNA’s rise). Hoskinson tossed one more straw on Kwon’s back, as UST and LUNA nosedived.
As of this writing, UST had returned to a price of $.82.
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