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UST crashes again: Luna Foundation Guard needs funding

 


The Luna Foundation Guard (LFG) is struggling to shore up its ailing UST stablecoin. This has once again detached itself from its US dollar peg.


As if a massive slump in the crypto market wasn't bad enough, the collapse of the world's third-largest stablecoin ecosystem has certainly added fuel to the fire.


The Luna Foundation Guard, a Singapore-based nonprofit that supports the Terra network, has reached out to investors hoping to raise funds to shore up the ailing stablecoin. LFG aims to raise more than $1 billion to hedge the UST stablecoin, according to The Block, which cites “people familiar with the matter .”


This move comes as no surprise given that the stablecoin has once again broken away from its US dollar peg. It has fallen below $0.70 twice this week.


No panic

Kwon Do, founder and CEO of Terraform Labs, has not yet commented on the fiasco and the funding has not yet been confirmed. At the time of writing, his last Twitter post was cryptic, to put it this way:



A few hours earlier, he tweeted: “We are about to announce a $UST recovery plan. Stay tuned."


On May 10th , the Luna team posted some clarifications to combat the tide of FUD that has taken over the mainstream media. In it, they stated that if the UST market cap is larger than that of LUNA, the token that backs the UST, there will be no “death spiral”.


They also stated that UST is supported by on-chain user activity and Terra economy demand such as network economic activity and corresponding cash flow. “Recovery takes some time given the parameters, but things are looking up again”.


According to the Google Analytics Dashboard , almost all USD reserve balances have been used to strengthen the stablecoin. It fell from almost $4 billion to its current level of around $146 million.

On May 10th, the stablecoin managed to recover to 90% of the US dollar value. But on May 11, the price fell again. A few hours earlier, UST plunged for a second time, hitting $0.696, according to CoinGecko . It has since recovered marginally and is trading at $0.805 at the time of writing.


This move has created a number of arbitrage opportunities between LUNA and UST, as well as UST and other stablecoins. LUNA has free-falled nearly 60% to $11.21, according to CoinGecko. Over the past week, LUNA has lost 86%. Compared to the all-time high in April, even a full 90%.


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