Key facts:
Criticism points to the centralization of LUNA and UST and the interests that are promised.
The stablecoin may regain parity with the dollar, but its credibility has taken a hit.
The resounding fall of the terra cryptocurrency (LUNA) and the Terra USD (UST) stablecoin set off alarms in many people, both those who trust this project and those who do not. Several decided to comment on the episode, from which both cryptoactives have not yet managed to recover.
Between Monday 9 and Tuesday 10 May, the price of LUNA fell by 44%, while UST experienced a free fall which not only made it lose its peg to the US dollar, but even took its price as low as $0.68.
Faced with such a drop in two crypto assets that accumulate a market capitalization of approximately USD 28,384 million (USD 16,686 million from UST and USD 11,698 from LUNA, according to data from CoinMarketCap), many actors in the cryptocurrency ecosystem expressed their opinion on social networks such as Twitter and Facebook.
For example, Bitcoin developer Jeff Garzik was critical of the stablecoin and its operationY wrote: “Even fully collateralized, the primary objective (an extraordinary annual return) seems almost impossible to achieve (as many claimed).”
But there were also those who defended the Fundación Luna project. For example, Fundación Luna board member José Maria Macedo was retweeted by Do Kwon, lead developer of UST, in writing: «The haters will criticize this for centralization and they are right, for now. Fundación Luna made UST more robust, but also temporarily more centralized. The Astroport Finance team is working on the fully decentralized booking mechanism.”
For his part, Nic Carter, partner at Castle Island Ventures and co-founder of coinmetris.io, opined in a publication on Twitter that “of all the bad ideas the crypto industry has come up with, algorithmic stablecoins are among the worst.” Furthermore, he argued that these “are not decentralized” and that “no one in their right mind would choose to hold a cryptocurrency at 100x risk compared to USDC or USDT.”
The repercussions reached Latin America
Some connoisseurs of the world of cryptocurrencies and finance in Latin America showed conflicting positions regarding the terra case and UST. Manuel Beaudroit, founder of one of Argentina’s cryptocurrency brokers, Belo, had opined on May 8 that “UST is going to continue to grow and improve” and that LUNA was going towards its maximum historical price or ATH.
After what happened the next day, with the sharp decline in the market value of Terra’s crypto assets, he received criticism for his “predictions” and did not hesitate to answer with optimism. On the one hand, he stated that he is still too soon (“too soon”) to jump to conclusions and questioned the idea that UST is dead, as one follower told him.
Others, on the other hand, were not so optimistic.. Such is the case of Pierpaolo Barbieri, CEO of the payment processor Ualá. About LUNA, UST, Terra and their Anchor protocol, Barbieri warned: “Beware of all those ‘guaranteed USD returns’ that aren’t yields, aren’t guaranteed, and don’t have the USD.” His message also seems like a jab at certain crypto brokers who recently added UST to their trading platforms.
While, another tweeter consulted Mariano Di Pietrantoniofrom the developer growth team of the stable cryptocurrency DAI (DAI), MakerDAO, why could not the same thing happen with that crypto asset. The developer’s response was that it is due to DAI’s “over collateralization”. In another tweet, he explained that DAI has a “larger than total currency” backing of the cryptocurrency. In addition, he returned to defend her in another tweet: «Second in a row that shoots to kill DAI and does shit».
One of these “attackers” had been Do Kwon himself, head of the development of UST, on March 23. “DAI will die in my hands”, had tweeted.
However, Di Pietrantonio’s intervention also earned him criticism from his followers. For example, one of them responded, referring to the LUNA and UST investors: “It is ugly to laugh at the situation. There would be people who would have 200k lying there and nothing happens, but there would also be the one who took out USD 50 to make ends meet without having to skip meals.
In the Facebook group Bitcoin Argentinaone of its members (Nicolás Bourbón) told about his experience using Anchor, the decentralized finance (DeFi) protocol of the Terra network. In this regard, he assured that “beyond the fact that he recovers the peg [la paridad con el dólar estadounidense]it is clear that the associated risk is monstrous and that the type of collateral definitely does not bank a sell off [una venta] of this magnitude.”
He then followed up his post by stating that “anyone with UST will probably never sleep peacefully again” and that “almost all protocols are far from solving real needs.”
What does the CriptoNoticias audience think?
Through the CriptoNoticias Twitter account, Followers were asked about their opinion regarding the UST stablecoin. When there are still several hours to finish the vote, more than 1,300 people left their opinion on the social network.
Regarding the stability of the UST cryptocurrency, an 65.5% of voters they stated that they do not consider it a stablecoin. The result of the vote is based on the fact that the Terra network cryptocurrency lost parity with the national currency of the United States on Monday, May 9, and has not yet been able to recover it, with a current value of USD 0.93.
Finally, regarding the centralization of the project, an 72% of participants stated that it is not a decentralized cryptocurrency. As this medium has reported in previous publications, the Luna Foundation is the organization that develops and makes decisions regarding the operation of the algorithm that controls the price of the cryptoactive.