Did Someone Deliberately Attack Terra/Luna to Kick off a Death Spiral?

Jon Wu, head of growth at Aztec Network, recaps a historically chaotic week in the Terra ecosystem that saw $UST depeg, Anchor depositors flee, and $LUNA fall 99%. Show highlights:

• how $UST, $LUNA, Luna Foundation Guard (LFG), and Anchor Protocol are supposed to work
• why Jon compares the Terra blockchain with VISA, LFG with the Fed, and Do Kwon with Jerome Powell
• how a previous $UST de-peg foreshadowed this week’s dystopian price action
• how a bitcoin short seemed to have kickstarted $UST’s depeg and why Jon thinks it was a deliberate attack
• why Luna Foundation Guard originally purchased Bitcoin – and how that plan backfired and made the Terra death spiral even more violent
• why $UST had such low liquidity this week – making it more susceptible to a bank run
• what Jon’s predictions are for $UST and $LUNA going forward
• what were the reasons behind Terra halting
• why Jon does not think this will be the end of algorithmic stablecoins
• why Jon thinks this should not affect ETH directly, even though there is a high amount of staked ETH in the Terra ecosystem

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Episode Links

Jon Wu

• Twitter
  • https://twitter.com/jonwu

Jon’s Write-Up on the UST Depeg

• Article: https://www.notboring.co/p/terra-to-the-moon-and-back 
• Thread: https://twitter.com/jonwu_/status/1523793482850050048?s=20&t=lvB1zdz98wu5TE5emh4fCw 

Previous Unchained Coverage of Terra

• Do Kwon on backing UST with BTC
  • ​​https://unchainedpodcast.com/do-kwon-is-backing-ust-with-bitcoin-and-heres-what-else-he-is-building/
• Kevin Zhou on the risk of UST’s death spiral
  • https://unchainedpodcast.com/heres-why-usdn-de-pegged-from-the-dollar-and-why-ust-might-too/ 

Terra:

• Terra proposal to accelerate the burn of UST and increase the base pool: https://station.terra.money/proposal/1164 
  • https://www.theblockcrypto.com/post/146254/terraform-labs-ceo-do-kwon-unveils-plan-to-restore-ust-peg
• Terra halting the network: https://twitter.com/terra_money/status/1524785058296778752?s=20&t=FUJkFuN8PyxRoF9TCPgrGg
• Terra going live again: https://twitter.com/terra_money/status/1524812171179327488?s=20&t=FUJkFuN8PyxRoF9TCPgrGg
• Regulatory risks: https://www.theblockcrypto.com/post/146426/the-sec-has-already-sued-terraform-labs-it-has-every-reason-to-investigate-ust-lawyers-say 

Other Recaps on Terra: 

• CoinDesk on how Do Kwon was behind previous algorithmic stablecoin: https://www.coindesk.com/tech/2022/05/11/usts-do-kwon-was-behind-earlier-failed-stablecoin-ex-terra-colleagues-say/ 
• Rekt: https://rekt.news/luna-rekt/