.LFG_org’s proposed cryptocurrency reserve could have been a lifeline for $UST, but it came too little too late, says Vetle Lunde, analyst at the Norway-based crypto research firm Arcane Research.
To address those fears, Terraform Labs, the firm that developed the Terra blockchain, coordinated with other investors to create an organization called the Luna Foundation Guard and started to accumulate a reserve that would support UST’s peg in a crisis.
LFG went on a buying spree, filling up the reserve with about $3.5 billion worth of crypto assets and became one of the largest single bitcoin holders on the market – but without a working system in place to deploy the reserve if a crisis happened.: If the UST price fell below 98 cents, traders could swap UST to bitcoin at the price peg, creating demand for UST with an arbitrage incentive.But the crisis happened before the system could be put in place.
Jose Maria Macedo, a council member of the Luna Foundation Guard, told CoinDesk the bitcoin swap mechanism was expected to be shipped by the end of next week by the developer team of Astroport, a token exchange built on the Terra blockchain.Monday that the testnet launch was a few weeks away. There has been a lot of talk about the chokepoints of algorithmic stablecoins lately, with critics saying that they are inherently unstable in a market downturn, and vulnerable for market participants to exploit weak points in the design.
Sean Farrell, analyst at FundStrat, wrote in a report Tuesday that “we have ample reason to believe that the ‘run’ on UST was not a coincidence, but a deliberate exploit of UST’s architecture.
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