Altcoins News
By Maheen Hernandez
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Terra Powered by Luna expressed: LUNA can easily shoulder the outstanding liabilities of UST, it just needs time to recalibrate and confidence restored.
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Extreme volatility produced a series of collateral effects across the Terra ecosystem, primarily derived from the short-term peg deviation of UST and its impact on the volatility…
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The Terra protocol mechanism is quite simple: When the supply of Terra stablecoins (like UST) goes up, the LUNA supply goes down.
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As an algorithmic stablecoin network, Terra is akin to a decentralized, open-source central bank.
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Assets (LUNA) and liabilities (UST) maintain parity by the Terra protocol acting as a market maker, inflating the LUNA supply during UST contractions and deflating the LUNA…
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Terra is designed with explicit, real-time levers to combat the negative effects of endogenous collateral models (increasing tax rate on txs + cashflows to stakers) that…
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Terra primarily achieves this via the on-chain swap mechanism that is baked into the protocol. Users can always go-to protocol to swap $1 worth of LUNA for 1 UST and vice versa.
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The sharp price declines in LUNA were compounded by the sell-off of LUNA due to large amounts of liquidations on anchor protocol.
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This is primarily because the on-chain swap spreads inflated to 7 - 9% during the worst period, making the classic time-based arb opportunity fundamentally unprofitable on-chain…
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LUNA’s sharper price fall compared to other assets is a function of Anchor building up leverage on LUNA/bLUNA with cascading liquidations leading to market sells of LUNA --…
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Plagued by the cumbersome nature of stress-induced decision-making of human agents in times of market volatility, it’s why central banks are exploring CBDCs.
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Terra Powered by Luna concluded, stating, As long as we create useful applications that people use on top of Terra, a strong locus of demand will always exist.
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