The collapse of LUNA and UST undoubtedly caused a huge upheaval in the cryptocurrency world. These two tokens based on the Terra blockchain were once seen as the epitome of algorithmic stablecoins, but it was their price volatility and the collapse of market confidence that necessitated a re-examination of this mechanism.
In this incident, UST, as an algorithmic stablecoin, was supposed to be firmly pegged to 1 dollar. However, because its stability relied on dynamic conversion with LUNA, this balance was disrupted when market confidence wavered. Especially under the impetus of the high-yield Anchor protocol, a surge in demand led to a shortage of UST, which in turn drove up the price of LUNA. However, the complexity of the internal mechanisms and excessive reliance on market confidence made it like a high-rise building made of cards, unable to withstand the wind and rain.
After the tightening of U.S. monetary policy and the sell-off behavior of market participants on May 4, panic quickly ensued. Ultimately, the large-scale minting of LUNA in an attempt to restore the peg of UST exacerbated LUNA's inflation, making a price collapse inevitable.#Web3 #币圈 #Una #UST #九月加密市场能否突破？
