Why I am Betting against TerraUSD

How TerraUSD intends to keep its peg

  1. buying 1 UST for 0.99 USD
  2. redeeming the bought 1 UST for 1 USD worth of LUNA (if LUNA were to trade for example at $100, that would be 0.01 LUNA)
  3. selling the redeemed LUNA for 1 USD

Fragility

Terra’s ponzinomics

  1. Convert 1 USD to 1 UST
  2. Deposit 1 UST into Anchor for some time and receive x UST interest
  3. Convert 1+x UST to 1+x USD

Death spiral

TITAN price crashes to $0 in June 2021 (nomics.com)
IRON price crashes to ca. $0.75 in June 2021 (nomics.com)

Depegging scenarios

  • 0.95 USD for 1 UST, when 450k UST per minute are traded
  • 0.50 USD for 1 UST, when 7M UST per minute are traded
UST price temporarily depegs in May 2021

Terra’s Bitcoin reserve

Salvation through Bitcoin appreciation

Conclusion

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Hjalmar Peters

Hjalmar Peters

Crypto trader, effective altruist, vegan, occasionally enjoys poker, physics and climbing