Members of the LGM community who have invested in LOOMCOIN ™ may have found this story unsettling in some way:
The recent crypto meltdown, which has seen billions of dollars wiped off the market, has in large part been sparked by the crash of a controversial stablecoin known as TerraUSD or UST, which is supposed to be pegged one-to-one with the U.S. dollar.
UST has however lost its peg and on Friday was trading at around 14 cents, according to data from CoinGecko.
Luna, a token closely associated with UST, is now worth $0 as a result.
UST and luna are linked. UST is dubbed an algorithmic stablecoin meaning its $1 peg is supposed to be governed by underlying code. That is fundamentally different to other stablecoins like tether and USDC which are backed by real-world assets such as bonds. UST has no real-world reserves.
The UST algorithm works through a complex system of minting and burning tokens to maintain price stability. A UST token is created by destroying some of the related cryptocurrency luna to maintain the dollar peg.
But the extreme market volatility has put UST to the test and it has been unable to maintain the peg.
Adding further complications is the fact that the Terra blockchain which underpins UST and luna stopped processing transactions twice in the less than 24 hours.
On top of the UST saga, crypto markets have been hit by a number of other headwinds including higher inflation and interest rate hikes that have caused a sell-off in global stock markets which has filtered through. The price movements of cryptocurrencies have been correlated to stock markets.
“The Luna/UST situation has hit market confidence quite badly. Overall most cryptocurrencies are down [more than] 50%. Combining this with global inflation and growth fears, does not bode well in general for crypto,” said Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno. . . .
TerraUSD, or UST, is supposed to mirror the value of the dollar. But it plummeted to less than 30 cents Wednesday, shaking investors’ confidence in the so-called decentralized finance space.
Stablecoins are like the bank accounts of the barely regulated crypto world. Digital currency investors often turn to them for safety in times of volatility in the markets. But UST, an “algorithmic” stablecoin that’s underpinned by code rather than cash held in a reserve, has struggled to maintain a stable value as holders bolted for the exits en masse.
On Thursday, UST was trading at about 41 cents, still well below its intended $1 peg. Luna, another Terra token that has a floating price and is meant to absorb UST price shocks, erased 99% of its value and was last worth just 4 cents.
The Management, aka The Old Ones, wish to emphasize in the strongest possible terms that LOOMCOIN ™ cannot decline in value; it can only go up. This is because the value of LOOMCOIN ™ is pegged against an algorithmic quantitator that varies with, among other things, the ten-year US treasury yield, the rotation of the Earth, the number of times Kim Kardashian is mentioned in the NEXIS database per day, Mike Trout’s slugging percentage, and several other factors that are proprietary.
As a special incentive to investors, the Management is announcing that, for every U.S. dollar contributed to LGM during our annual fundraising drive later this month, contributors will receive ten or one hundred or one thousand LOOMCOINS ™, depending on how many upvotes their comments have received during this calendar year.
Act now, as quantities are very much unlimited.