Crypto_Carlosa Authors Stable Labs

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Stable Labs
Stable Labs
@0xStableLabs
UST depeg summary: WHY AND WHAT CAUSED UST DEPEG?

Hint is in Anchor protocol and the status of Curve UST pool. @anchor_protocol @terra_money

@terra_money 1/ There were series of notable events that happened during the recent UST depeg event.
In this thread, I will share my thoughts on what caused the depeg.

@terra_money 2/ May 7th, 2022. 9 pm was the time that starts the depeg event.

First, UST deposits in Anchor protocol started to exit, which means more circulating UST in the market → sell pressure.


@terra_money 3/ Simultaneously, 150M UST was withdrawn from Curve wormhole UST3CRV pool followed by large UST → USDC swap that caused significant imbalance between UST(85%) and 3CRV(15%) in the pool.


@terra_money 4/ However, some address made series of transactions to restore the balance in the Curve pool. Here are lists of relevant transactions.
https://t.co/gx9nr7kNcN (05-08-22, 02:30 AM)
https://t.co/bPKhvgfT72 (05-08-22, 02:40 AM)
https://t.co/8Yd056olrL (05-08-22, 03:00 AM)
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Stable Labs
Stable Labs
@0xStableLabs
The EPIC CRASH of Terra is not about it’s mechanism - it’s all about the operation.

In this thread, I’ll talk about the FUNDAMENTAL REASON OF CRASH.

1/ As you all know, the price of UST crashed for last few days. In my opinion, Terra’s price stabilizing mechanisms themselves were not the problem.

In fact, their oracle, onchain market, and Luna staking reward mechanisms are designed very carefully.

2/ Then what’s the problem? It’s their operation policies. TFL launched anchor protocol which gives 20% fixed earn rate, making over 70% of the UST supply reside in anchor deposits.

This means that the demand of UST is totally concentrated on one use-case (14B out of 17B).

3/ As there are more healthy use-cases using UST as a value of $1, the demand graph becomes smoother. On the other hand, if the demand is concentrated on a single use-case, the demand graph becomes stiffer, which is the case for UST.


4/ Stiff demand graph means high price volatility, which means UST had intrinsic weakness in price stability due to its concentrated demand.

Even with the slight depegging of UST would lead to large change in UST demand.
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