Many people seem to be confused with Terra and LUNA. Well, Terra refers to the name of the token, and LUNA is its symbol. Do Kwon is the CEO of Terra Labs, the creator of both TerraUSD (UST) and Terra (LUNA).
UST = USD
LUNA = Interest Rates
Do Kwon = Federal Reserve
De-pegging = Inflation
Print Trillions of $ backed by nothing.
When its value goes down the Fed steps in with interest rates.
Until it doesn’t work anymore…
1. Terra CEO is buying billions in #Bitcoin with free money. How?
Is the end game to create a Terra “ecosystem” or to accumulate BTC, the best asset in the world?
2. Terra’s CEO is buying #BTC with UST & Luna
Why?
Why not buy and hold Luna instead?
Because he knows Luna is a poor long term investment.
He’s so smart he is buying billions in BTC with free money! Got to give him credit for that.
3. How do they create free money to buy BTC?
By using smart tokenomics!
They burn Luna to mint UST.
Instead of the dollar value transferring from Luna’s market cap (mc) to UST mc, the dollar value is retained in both market caps!
WOW I just doubled my money!
4. This free money creation process is further compounded upwards as Luna’s circulating supply decreases & its price increases during the burn/mint process!
More free money as Luna’s price goes up!
5. The UST/Luna market caps are like hot air balloons
The more money they create out of nothing, the higher the price of Luna & more UST can be created.
6. As more Luna is burned to print UST the number of Luna in circulation decreases.
Market cap = circulating coins x price/coin.
This means that the total market cap of Luna can actually be quite low as UST mc increases even if Luna’s price will be high.
7. As soon as Luna’s mc is lower than UST mc, trouble starts
Luna’s purpose is to absorb the volatility in UST market cap (increase/decrease in mc).
As UST mc grows, the risks increase too, particularly for Luna holders.
8. When demand drops and people will seek to sell UST and exit Terra
The reverse will happen and 1 UST will be worth less than 1 USD
9. But understand that UST mc is essentially created from nothing & if everyone wants to exit there won’t be enough for all!
The market cap of UST & Luna are not real and are backed by subsidized demand.
They will crash extremely fast when incentives stop (ie no top ups).
10. Myth number 1: “Terra / Luna / UST is decentralized”
Terra Luna is not decentralized unless 130 validators qualify as such (see below).
ETH has millions of validators. Why does #Luna have ONLY 130 validators?
Having more would dilute profits made by said validators running the network.
UST is centrally controlled and managed. From minting to burning & USD peg management.
First, minting: Terra insiders & its Foundation minted all Luna for free
11. They burn the #Luna they minted for free to issue UST
Then they swap #UST for anything else.
The more the Terra ecosystem grows, the more options they have to do so. Including, buying #Bitcoin.
12. More Luna burnt = more UST + higher Luna price = more UST…
But what backs all this “new money”?
The “ecosystem” they say. Sounds familiar?
This new money, particularly $18 bil worth of UST has NO BACKING!
If UST has no backing, something will break right, RIGHT?
YES. The #UST peg to the dollar!!!
13. Myth number 2: “UST is a stablecoin.”
Verdict: FALSE ❌
UST is actually Luna with a different label due to the mint/burn mechanism
UST is a stablecoin in name & works well in a bull market
As soon as a bear market starts, things collapse around it since it has no collateral to back it
Source : Duo Nine
How a wealthy attacker could not only break Luna but also profit heavily doing it with a Soros style Black Wednesday attack
A. Long $100M of $LUNA
PnL impact: $0
Net PnL: $0
B. Purchase $100k of $LUNA and immediately withdraw from exchange and swap to $UST using the Terra seigniorage mechanism. Fee is 0.5%. Repeat 10,000 times (use a bot) so you accumulate 500M UST for ~$502.5M.
PnL impact: -$2.5M
Net PnL: -$2.5M
C. Sell your initial $100M $LUNA from step 1. Since there has been $500M of $LUNA market bought in step 2 looking at the current order books/PA I think a reasonable estimate here is +30% or $30M profit.
PnL impact: +$30M
Net PnL: +$27.5M
D. Deposit $200M worth of bETH on Anchor Protocol and take a loan out for 100M $UST
PnL impact: $0
Net PnL: +$27.5M
E. Short $100M of $LUNA
PnL impact: $0
Net PnL: +$27.5M
F. In $100k chunks use seignorage again to convert 500M $UST (step 2) and 100M $UST (step 4) to $LUNA. After each conversion dump the $LUNA. Conversion fee 0.5% and the rate limit means this step will take a week. 600M UST sold for ~$597M.
PnL impact: -$3M
Net PnL: +$24.5M
G. Close the $LUNA short from step 5. Since there has been $600M of $LUNA market sold in step 6 I think a reasonable estimate here is -30% for $LUNA price or $30M profit.
PnL: $30M
Net PnL: +$54.5M
H. Payback loan from step 4 and reclaim your bETH.
PnL: $0M
Net PnL: +$54.5M
I. Repeat. After a few iterations the protocol will collapse at step 6. Many #Lunatics assume that $LUNA can never have a value of 0. This is only true if the future circulating supply of $LUNA isn’t but above process leads to ∞ $LUNA being minted…
Source : Freddie Raynolds
https://israel-lady.co.il/
May 16, 2022 at 5:48 am
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