LUNA AND UST CRACH (USDD in danger) - 10% to Tron-Fan-Club

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Good day everyone and welcome to my blog.

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It is so apparent that the bears have been in control of the entire crypto market for a long time and instead of seeing a recovery, we keep seeing new lows.

Retail Investors are already getting tired of waiting for Lambo days which had led some of them into withdrawing their investments and chasing greener pastures through other means.

Since the being of 2022, the crypto market has been performing so poorly to the point that whenever we see a 10% increase on a coin, a 20% decrease follows suit. In as much as all this has been happening, nothing can be compared to what we just witnessed on Luna and its sister stable coin UST.

The dump on Luna appeared as though it was a hack but was only an effect of TerraUSD unpegging from the US dollar.

The stable coin which has its value pegged to the US dollar maintains its stability through an on-chain mint and burn mechanism with its sister token Luna by allowing users to burn an equivalent $ worth of Luna whenever they want to acquire UST.

So let's say, if a user wants to acquire 1 UST, the user will have to burn $1 worth of Luna in other to get it with an attached fee going to delegates and those who have Luna stakes on the platform.

The Luna token also supplements the supply of UST whenever the price goes below $1. This explains why Luna has a flexible supply and also maintains its total supply at 1 billion by automatically burning excess supply whenever it exceeds 1 billion.

The above mechanism has been efficiently keeping UST pegged to the US dollar in a ratio of 1:1 until the 9th of May when we saw a drop in the price of UST following an attack known as the Wormhole hack. This gradual drop in UST value also leads to a slight drop in the price of Luna because of the link they share.

Due to this unpeg, users started swapping UST to other stable coins thus leading to a more drastic drop in the value of the stable coin.

This led to a massive sell-off by Luna holders thus making the price crumble as well and leading to what will be regarded as one of the most rapid crashes in the price of a cryptocurrency asset with a good use-case.

This whole incident has also exposed the instability of decentralized stable coins which has also explained why the Terra project founder has clearly stated that the UST mechanism will be collateralized on rebuild.

• See below

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Since we have seen the lack of stability on algorithmic stable coins, this will now leave us to wonder if the just launched decentralized stable coin known as USDD has taken a bad form by following the algorithmic method of pegging to US dollar similar to what is used by TerraUSD.

Only time will tell but I believe that for now, this whole incident will harm USDD and will eventually reduce its volume and until USDD through the test of time proves to be stable, arbitrage traders on the Tron blockchain will rather exploit their arbitrage opportunities using USDT which has a more centralized means of pegging to US dollar.

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That's it from me for now
See you next time..