16 May 2022

Storm settles: LFG’s BTC reserves drained – contagion no more

Over the last week, the Luna supply has inflated by nearly 2 million percent. Meanwhile, the Luna Foundation Guard fought to save the peg, selling 80,081 BTC in a failed attempt to raise the sinking ship.
Source: Tradingview (FTX)
Luna and UST have seen a further collapse in the last week. UST currently trades far from its peg at 8 cents, and Luna’s circulating supply is experiencing Weimarian hyperinflation as the supply has increased by 1,903,664.72% in the last seven days, according to data from Messari. This is a follow up on last week's in-depth coverage of Luna and UST. On Monday, the Luna Foundation Guard announced BTC reserves of 313 BTC. Ten days ago, the foundation held 80,394 BTC – thus, the foundation sold an excess of 80,000 BTC during the extremely volatile days last week.
Source: BitApps, Luna Foundation Guard
The impact on the broad crypto market and bitcoin seems to have dwindled now after the massive hits early last week. With LFG drained of BTC, we can again resume zooming in and out of the Nasdaq and S&P 500 charts pointing towards the frustratingly high correlation. In sum, this event has exposed the weaknesses of algorithmic stablecoins during market stress. Never forget the last few weeks in the market and the LUNA/UST situation. There are more sound alternatives for dollar exposure in the crypto markets. Egirl Capital published a quality assessment on the performance of algo stables and collateralized decentralized stablecoins last week. We recommend giving it a read.
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