Billy Markus, co-creator of Dogecoin (CRYPTO: DOGE), believes that the latest cryptocurrency catastrophe is reason enough to lose faith in “crypto bros.”
What Happened: On Monday, Markus shared a series of tweets by Aztec Network’s Jonathan Wu explaining the drama surrounding the Terra (CRYPTO: LUNA) ecosystem.
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read this thread to lose faith in crypto bros please https://t.co/37hl3eGp7P
— Shibetoshi Nakamoto (@BillyM2k) May 10, 2022
Wu noted that the stabilizing mechanism between Terra’s stablecoin TerraUSD (CRYPTO: UST) and LUNA had been displaced thanks to the “magical chaos of algorithmic stables” and some amount of Bitcoin (CRYPTO: BTC) systematic risk.
As the price of LUNA crashed to $28.03 earlier today, its market cap fell below UST’s $14 billion. According to Wu, the most concerning part about this is the average redemption price of LUNA for UST exceeding LUNA’s current price in the market.
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Let me slow that one down:
— jonwu.eth (@jonwu_) May 9, 2022
- $LUNA price high
- $LUNA burned, many $UST minted
- $LUNA's price fall
- $UST redeemed for many $LUNA
That is bad mmkay?
Now, Bitcoin is being driven lower due to macro and (ironically) expectations that LFG will be forced Bitcoin sellers due to $UST peg pressure.
— jonwu.eth (@jonwu_) May 9, 2022
Any redemptions of $UST -> $BTC now will essentially be booked losses for LFG, when they could have just sat on stables instead.
Wu summarized the past few days' events by concluding that UST is “100 magic dollars backed by 20 bitcorns and 80 magic beans.”
tl;dr$UST is 100 magic dollars backed by 20 bitcorns and 80 magic beans, but some people don't think it's worth 100 real dollars, so LFG is selling bitcorns to buy more magic dollars to convince people they're worth 100 real dollars, all so the magic bean holders don't get sad
— jonwu.eth (@jonwu_) May 9, 2022
Price Action: According to data from Benzinga Pro, LUNA was trading at $24.17, down 60% over 24 hours.