The fall of Terra/Luna/UST continues to make headlines. This time, we will use the data from ARK’s “bitcoin monthly“Report to establish its impact on the bitcoin ecosystem. Recall that the non-profit organization LFG, AKA, was depositing BTC to hedge USD’s dollar as the Luna Foundation Guard. The then-delayed May interviewIn , Terra’s Do Kwon said that they were trying to get $1 billion in BTC so that “besides Satoshi, we will be the largest single holder of bitcoin in the world.” He also declared, “Within the crypto industry, the failure of UST equates to the failure of crypto.”
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At one point, it appeared that the destinies of BTC and UST were inextricably linked, but the bitcoin network almost never completed the collapse. Let’s look at ARK’s numbers and try to figure out how he did it.
Terra, the Largest L-1 Blockchain Failure Ever
At this point, everyone knows what happened to Terra. Although no one knows how it happened. Was this a coordinated attack or did natural market forces trigger the death spiral event? We would not know, but the fact of the matter is that UST has been decoupled from the dollar, leading the bank to operate in the anchor protocol, and the eventual demise of the algorithmic stablecoin and its twin, LUNA.
How big was the fall? According to the ARK report:
“In addition to the crash at UST and Luna, we believe the biggest Layer-1 blockchain failure in TerraCrypto history, eroding the combined $60 billion market capitalization between UST and Luna.”
Huge in size by any metric, but, how does it compare to the collapse of past crypto? The only comparable collapse was the “Mount Gox hack that stole 5.7% of the total crypto market cap in 2014, the collapse of Terra destroyed approximately 2.7% of the total market capitalization of crypto.” Gox hack almost destroyed the bitcoin network at a time when it was more vulnerable. Terra Fall felt like a breeze in comparison, but, as the figures show, it was not.
BTC price chart for 06/07/2022 on Eightcap | Source: BTC/USD on TradingView.com
How did the Terra collapse affect BTC?
In addition to the LFG Foundation reportedly selling off its 80K BTC, the collapse created extreme selling pressure on Bitcoin. According to the report, “the exchange recorded a net inflow of 52,000 bitcoins, the largest daily inflow in BTC terms and the largest ever since November 2017 in USD terms.” These are remarkable numbers.
Bitcoin Net Flows To and From Exchanges | Source: ARK’s “The Bitcoin Monthly”
According to the bitcoin blockchain, “the account linked to LFG currently holds 313 BTC, down from the 80,934 BTC held before Terra opened.” Did he sell the rest, though? No one knows for sure. Back to report:
“To reverse the peg of UST, Luna Foundation Guard (LFG) reportedly sold most of its ~80,000-bit bitcoin reserves, contributing to this record inflow.”
Surprisingly even hardcore bitcoiners, the network resisted this massive sell-off without breaking a sweat. Certainly, the price of bitcoin was affected, but the blowout was nowhere close to being fatal. And ARK’s prediction reflects that fact, “Now that Terra is separated from the blockchain, bitcoin’s selling pressure should ease, yet the transition to crypto markets is still inconclusive.” Why? Because “Bitcoin’s more secure and conservative blockchain should gain market share.”
Are algorithmic stablecoins even possible?
We will quote the NYDIG report to answer this.”On impossible things before breakfast,Which comes with the subtitle, “Postmortem on Terra, Pre-mortem on DeFi, and a glimpse of the madness to come.” As the title suggests, NYDIG believes that neither algorithmic stablecoins nor Nor is DeFi as it currently stands, possible. Why? Well…
“No matter how well-intentioned, all algorithmic stablecoins will fail and the vast majority – possibly all – of current versions of DeFi will fail, where “fail” means not achieving enough critical mass for the case. , hacked, blown up or replaced by regulation to the point of non-viability. Ultimately, the Terra project could control its money supply, but it could not value its people. A printing press sole ( The non) answer was. Known? Due to the lack of a lender of last resort, DeFi (re)creates problems solved by central banks. Bitcoin solves problems created by central banks.”
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As is usually the case, we can sum up this entire article with the old adage: “Bitcoin fixes it.”
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