$2 Billion Bitcoin Sold to Stabilize Crashing UST Dollar – Trustnodes

The dollar stablecoin UST crashed to $0.68 in one of the biggest depeg ever seen in this space.

The stablecoin has now somewhat recovered, but it is still down to $0.91 from its supposed $1 per coin even as the big bitcoin treasury reserves built up over the past two months have now been depleted:

In the first ever large scale public sell-off of bitcoin, blockchain data shows more than 70,000 BTC has been sold to stabilize the peg.

That’s worth $2.2 billion, with the 42,000 BTC built up over March and April as the Luna foundation turned USDc and USDt stablecoins into bitcoin.

The 28,000 BTC seemingly comes out of nowhere, and just as quickly vanishes to an address that has received some 8 million bitcoin overtime.

That can’t be anything else but an exchange, with this huge sell-off contributing to bitcoin’s price briefly falling below $30,000.

Panic in UST apparently began on Sunday with suggestions $285 million worth of UST was sold off on Curve and Binance followed by Luna shorts.

Luna is the governance token that is meant to stabilize UST. If Luna is worth $50, then you can redeem one Luna for 50 UST. All great if prices go up, if they go down however you can redeem UST for Luna, increasing Luna’s supply, lowering its price, leading to more redemptions, in a downwards spiral.

Which means Do Kwon, Luna’s founder, got margin called. He bet long with two volatile assets, and turned the stable into a volatile coin when markets crashed.

That shows the peg here is not too sound. Dai, which also is pegged through asset backing, is currently at precisely $1.

It is holding its peg because it is completely algorithmic. Bots sell off eth or whatever other asset if price falls to the point of effectively a margin call, with only the supply of Dai increasing or decreasing.

While for Luna we have some manual management as seen by these bitcoins moving. Humans are slow, not subject to the rules of maths, and so the UST peg is off.

With all these bitcoin sold now, the question is whether the worst is over as at least this pressure has been taken off. While for UST, the question now is more just how stable is this stablecoin when it matters.