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The Almighty Buck

Price of Algorithmic Stablecoin UST Drops 2% Below Dollar Peg (theblockcrypto.com) 44

Posted by msmash from the how-about-that dept.
The algorithmic stablecoin UST briefly fell 2% below its peg to the US dollar on Monday, according to data from crypto exchange Binance -- the fourth significant drop below its peg in the last two days. From a report: UST is a stablecoin backed through its relationship with the LUNA token. A burning mechanism and the ability to always be able to sell $1 worth of LUNA for 1 UST are designed to keep it in check. Yet critics say the success of this operation depends on the strength of LUNA's price and on its key DeFi platform, Anchor, continuing to produce an up to 20% yield to incentivize liquidity -- something that's on track to run out soon barring any fixes.
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Price of Algorithmic Stablecoin UST Drops 2% Below Dollar Peg More

Price of Algorithmic Stablecoin UST Drops 2% Below Dollar Peg

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  • "DeFi" = "Deregulated Finance" (Score:1)

    by Anonymous Coward

    ...this operation depends on the strength of LUNA's price and on its key DeFi platform...

    Remember kids, "DeFi" means "Deregulated Finance".

    • Re:"DeFi" = "Deregulated Finance" (Score:5, Insightful)

      by zeeky boogy doog ( 8381659 ) on Monday May 09, 2022 @07:42PM (#62518178)
      "We want all the benefits of regulated finance with none of the regulations."

      Translation: "We want all the rights of freedom but reject any of the responsibilities." Otherwise known as the default position of teenagers who want license, not "freedom."
      • When your $1 token is supposed to to have $1 actual dollar backing it. If it drops to 98c,that means there isn't $1 backing your token, and probably the treasuries and corporate bonds they bought have recently lost a huge amount of value. My guess is that your $1 token is probably worth a lot less than 98c. But good luck reading over their prospectus on what they're actually holding...

        • Re: "DeFi" = "Deregulated Finance" (Score:5, Insightful)

          by ceoyoyo ( 59147 ) on Tuesday May 10, 2022 @12:17AM (#62518526)

          It's an algorithmic stable coin so it doesn't need any backing. If the price drops your money starts magically disappearing until someone's willing to pay $1 for one again.

          What could possibly go wrong?

          Now, this one is even more sophisticated. There are *two* coins, so if one falls below $1 some of it disappears, but you get compensated with some of the other. If it gets too high they print some more, but you have to pay some of the second currency in exchange.

          This is totally not a pyramid balancing on top of another pyramid.

  • If the promise is broken, who can you sue? What will you get?
  • I still don't get it. I mean, I get the whole encrypted blockchain, rows of quantum supercomputers, disinterested primates, yadda, yadda, yadda . . . but what does it do?

    • It timestamps data into a stream.

      For example, you ever try to convince someone that you called some rare event years ago? Put your claims on the blockchain and the world will prove you right.

    • Re: (Score:3)

      by gweihir ( 88907 )

      . . . but what does it do?

      Transfer of money from greater fools to fools. And some money laundering and extortion payments for ransomware. Actually probably a lot of extortion payments for ransomware and probably a lot of money laundering. So gambling and criminal uses. A true moment of glory for the human race...

      • Re: (Score:1)

        by Anonymous Coward

        Coming from a CS background, I rather trust a program that some politically appointed judge and extremely expensive lawyers to enforce a contract. Most people with zero idea of what they are talking about think like you, because they can't separate the scams or hype from the real impact it will have. People like you were dismissing internet around the year 2000, then the reality is that about 50 companies made it work and if you had $100 in any of those you'd now have a million for each $100 bill you invest

  • blockchains all the way down (Score:3)

    by awwshit ( 6214476 ) on Monday May 09, 2022 @03:20PM (#62517408)

    > UST is a stablecoin backed through its relationship with the LUNA token... the success of this operation depends on the strength of LUNA's price and on its key DeFi platform, Anchor

    Blockchains with sketchy governance and voodoo software all the down. What could go wrong?

    • I know plenty of things that could go wrong. What I really want to know is, how do I short it?

    • Re: (Score:2)

      by splutty ( 43475 )

      I think "What might go right?" would be an easier question to answer. The answer being one word.

    • Yeah, that's one of the absurd things about this (or likely any) "stablecoin". It's a cryptocurrency that's kept stable... thanks to a relationship with another cryptocurrency.

      But obviously at least a few crypto-bros thought "that makes perfect sense." wink wink.

  • Algorithmic stablecoins (Score:3)

    by Vintermann ( 400722 ) on Monday May 09, 2022 @03:21PM (#62517410) Homepage

    Oh yes, algorithmic stablecoins. Algorithmically guaranteed to be stable, no messing around with non-chain backing assets that may or may not exist. Only downside is that they can only be stable with respect to... another cryptocurrency. Brilliant, at least until people notice.

    • Re: (Score:2)

      by splutty ( 43475 )

      No sir, don't mind the fact that the foundations are spun sugar. It's never rained here. And we keep the children out.

    • Re: (Score:2)

      by gweihir ( 88907 )

      Brilliant, at least until people notice.

      That seems to be the modus all crapcoins operate under...

  • "depends on the strength of LUNA's price and on its key DeFi platform, Anchor, continuing to produce an up to 20% yield"

    Seems like depending on 20% returns to functionally exist might be unsustainable but I'm just a humble web 2.0 user.

    • Re: (Score:2)

      by gweihir ( 88907 )

      20% yield (annually?) is a reliable sign of a scam or very high risk investment. Not sustainable at all and currently only works due to hype and a mass of stupid people buying the hype.

  • Several major investors have put that as their point when they're going to sell everything off. The whole market collapses around that time. It's down to 35k right now and if you're paying attention I'm sure you can find more than a handful of people pumping the price up. Once Bitcoin collapses the rest of the market will go with it.

    This is why Nvidia got fined 5 million dollars for hiding how many gpus they were selling to crypto miners. The market's about to collapse and everyone knows it. Hopefully it doesn't take the rest of the economy with it. We allowed the crypto markets to hit almost 2 trillion in value. And I use the word value loosely. It's insane that imaginary bullshit on a computer not back by a government or its military and institutions could be allowed to be valued like that.

    • Re: (Score:2)

      by gweihir ( 88907 )

      Indeed. The whole thign has less stability than a badly built house of cards.

      I think I will buy a Bitcoin when it goes below $10, just as a historical artefact of a really bad idea that exploded all out of proportion due to greed and stupidity.

      • As long as there's no regulation and no recession. Well that's going on the money laundering and drug purchases create a floor that Bitcoin doesn't fall below. Mind you there's a lot of unpleasant illegal activity going on, think stuff like drug cartels buying heavy weapons and corrupt governments stealing money from their citizens. But it does keep the price high enough to prevent the whole thing from collapsing up to a point.

        Of course if we go into a recession they'll be a sell-off either way and when

    • It's down to 35k right now and if you're paying attention I'm sure you can find more than a handful of people pumping the price up.

      According to Marketwatch, BTC is just above 30K. I saw it below that mark within the last 30 minutes.

      • Yeah it lost a few thousand just after I was posting this. I suspect we're going to see some craziness to try and pump it up a bit. As mentioned the last time this happened the CEO of Tesla stepped in and did a questionably legal tweet that pump the price like crazy but I don't think he's going to try risk that with the SEC watching him like they are. And I don't know anything else that can keep that price where it's at and where it needs to be.

        I'll be happy to see it collapse the market. The last time

  • Seems "stable" crapcoins are really just the same scam and do not offer any hard guarantees after all. Who would have thought...

  • This is literally an instrument designed to generate arbitrage. It dips below the dollar (so you buy) and then the anchor yanks it back up to a dollar and you sell. Rinse and repeat until it crashes down. Anyone who is selling these at less than a dollar and buying them back at a dollar is the mark and a fool.
  • If this was a money market fund, they'd be in a big heap a trouble with the regulators. Luckily for them they are "defi"
  • Finally a run on "stable" coin. Been waiting for this penny to drop for ages.
  • But, but, but ... It had both blockchainses and algorithmses.

    Two of the coolest buzzwords in all of the fashion industry*.

    How could it go wrong?



    * Oops I meant the tech industry. Not the fashion industry. But, to be fair, it's getting tougher and tougher to tell 'em apart, anymore.

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