This Week on Crypto Twitter: Do Kwon Takes Heat for UST Failure – Decipher


Illustration by Mitchell Preffer for Decrypt

It was the market sixth consecutive weekly declinebut on Crypto Twitter, the eyes of the industry were on the historic UST de-anchor.

Terra’s dollar-pegged algorithmic stablecoin crashed, hitting a low of $0.13 on Friday, causing a domino effect where LUNA’s price fell to practically zero as people rushed to exit the UST by trading it for LUNA, which is currently worth a fraction of a penny as the UST trades at $0.17.

There are plenty of questions, grievances, propositions, and conspiracy theories as to what exactly happened, but let’s first step back and remember the immense hubris of Terra CEO Do Kwon.

Last week he literally said it would never happen.

In March, he threatened to personally crush rivals in the algorithmic stablecoin market.

But this week, Kwon’s pride, like his plans, crumbled. I guess the Earth has become a little unstable?

The UST began to undock in earnest on Monday when it hit an intraday low of 79 cents. Do Kwon reassured his followers that he was doing everything he could to throw money at the situation.

He also tweeted vague whispers of a “recovery plan”.

On Wednesday, you’d be forgiven for thinking the Kwon had everything under control.

An hour later, he conceded defeat in a long thread.

On Friday, he personally drove the final nail into UST’s coffin.

“Predictable, if you knew the details”

Nic Carter, a blockchain journalist and general partner at crypto-focused investment firm Castle Island Ventures, pointed to the irony of Terra’s collapse. Do Kwon may believe that “decentralized economies deserve decentralized money”, but does a really decentralized currency let its creator take actions like this?

By Tuesday, Bloomberg Crypto journalist Muyao Shen had decided that she could no longer absorb Terra’s conspiracy theories.

FTX co-founder and CEO Sam Bankman-Fried pointed out that UST’s depeg was not a big enough surprise to warrant outlandish conclusions.

TRON CEO Justin Sun, who also recently released an algorithmic stablecoin similar to Terra’s, decided that he was going to show his support for Do Kwon, his main inspiration.

It should be noted that the similarities between Sun and Kwon go beyond having common ideas of stablecoins, or the fact that at some point both CEOs wanted to invest in Bitcoin reserves of $10 billion for their stablecoins. Even when it was worth a dollar, the sole purpose of holding Terra’s UST was to lock it into the DeFi Anchor protocol, which promised stakers a 20% return. This week, Tron promised the returns of Up to 30% for staking his own newly issued USDD stablecoin on the JustLend lending protocol.

At the height of LUNA’s collapse, Sun began FUDDing his own creation.

But Justin Sun has little reason to be afraid. While TRX is currently down 23% from last week – a normal decline for a flagship project – LUNA is down… over 99%.

Binance CEO Changpeng Zhao said he was “very disappointed” with Terra’s handling of the situation, and said the Terra team was “in stark contrast to Axie Infinity, where the team took their responsibilities, had a plan and communicated with us proactively”.

It should be noted that CZ’s own “handling” of the situation involved removing all LUNA trading pairs before resuming LUNA trading. exclusively against the BUSD, Binance’s dollar-pegged stablecoin. Binance also originally had a limit that stopped UST trades if the price fell below 70 cents, but on Tuesday the exchange removed that safeguard. Because profits.

Finally, the creator of Cardano and co-founder of Ethereum had a brief and nasty exchange with Do Kwon.

“Soros style”?

There were accusations that the crash was the result of foul play by attackers with insider knowledge. Crypto enthusiast @napgener blamed Citadel, accusing the US hedge fund giant of borrowing $100,000 in Bitcoin, trading it for UST, then dumping that UST to wipe out the market.

Other variations of this theory implicated asset management giant BlackRock in the plot, as well as crypto exchange Gemini. Both BlackRock and Citadel denied the charges in emails to Forbes. Gemini denied the accusation in a tweet the same day.

At least one blockchain developer said there was never any foul play.

Meanwhile, security researcher Eric Tung discussed LUNAtic adaptation theories.

That said, blockchain sleuth Onchain Wizard has published his own remarkably popular theory, suggesting that depegging actually could have been an attack.

Interesting that it refers to Soros’ bet in 1992 against the Bank of England. Last year, a tweeter called @FreddieRaynolds warned that Terra was susceptible to a “Soros” attack. At the time, Do Kwon dismissed this thread as “Probably the most retarded thread I’ve read this decade.”

But what most people can okay is that two huge Terra projects have failed spectacularly. And though we largely know what fueled the death spiralmany questions remain.

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