Hi. I noticed that UST’s and BTC’s price fluxuations became near identical starting May 8th/9th. See pics from Coinmarketcap 7 day UST with BTC chart and 1 day chart:
Edit: It really looks lika all of a sudden UST stopped being pegged to 1 USD and is now pegged to shifts in BTC value starting at a certain date and value of BTC between May 8th/9th (pacific standard times).
Can current market forces make that happen?
I’m not an economist, but software and IT background. Wondering if there is a code error that pegged UST to BTC.
An error in how LFG’s reserve deployed or in oracle pricing, or an assumption somewhetr UST is straight up BACKED by BTC rather than the reserve mechanism described in governance.
Or is, back to my first question, market forces taking over after depeg and all the arbitrage out there and such a tight correlation makes market sense?
2nd edit: Oh and thanks!
The UST depeg situation is not due to a coding error that correlates UST to bitcoin. The UST stability mechanism is performing as intended where 1 UST can be burned for 1$ worth of luna , this provides stability to the peg because when UST is less than 1 dollar it can be bought on the market and then burned for 1$ for luna at a profit.
So for example UST is 70 cents, you can buy UST for 70 cents , sell it for 1$ worth of luna and sell the luna on the market. The LFG bitcoin reserve’s goal is to provide a buffer in terms of volatility but UST was never fully backed by BTC.
Ok. Can you then explain why UST is not repegging but is tightly corellating instead to Bitcoin value shifts?
It is not going towards peg AT ALL, nor having a death spiral. It IS following Bitcoin. Why does it do so?
I think it’s just a matter of the fact that it’s not pegged anymore, so it’s being traded more like any token, as apposed to being a stable coin. I’ve seen people even doing TA on it, thus it’s probably more correlated to the crypto market in general. people are riding the waves up and down, by buying and selling for scalping profits. it’s not pegging because of the massive supply and holders who are wanting to get out. every pump gets sold off, until a better burn is implemented, and the sellers die off, it will struggle and be traded like every other coin out there. I wouldn’t say it’s directly linked to btc but for sure the general sentiment around btc probably coincides with UST.
Despite the on chain burn, the liquidity Curve pool scenario, all the liquidations, terra alt sells offs, luna bluna arbing, changes in liquidity pools on and off chain since, the changed burn mechanics since, etc etc no effect except UST keeps adjusting along with Bitcoin as if pegged OR price feed/oracle error or manipulation.
Edit: It is pretty dead on, the amount of variation it has following btc would be acceptable in these volatile times if that were 1 USD it were following. No way.
And I don’t know in all this if there would be a visble correlation between LUNA price and UST chaos (buying selling contracting). I can’t really see one but no idea if there even should be an obvious one or not.
Hey FaeLightCarmenum, I can’t tell if you are a troll or if you are seriously confused, but you are posting this everywhere. I registered to the site just to ask you to please stop, you are spamming proposal discussion threads and hurting readability of them. No one is answering you because there is nothing to take serious about what you are saying. Just keep your question to this thread if you really mean well and are just seriously confused.
There is no bug. There is a limit on how much UST can be burned for Luna, that’s why it’s depegged. There is too much bad debt trying to exit the system faster than UST can be burned for Luna. Luna supply is being minted and sold to burn UST, therefor the price of Luna is going straight down as expected. You can’t see a correlation between the price of Luna going down and UST going up at the moment because the burn is too slow compared to the amount of UST wanting to exit and speculators doing scalps.
Because the burn is too slow, the price of UST is now dictated by the market, therefor it follows market sentiment and goes up and down. There is no “pretty dead on amount of variation of it”, it just goes up and down.
You are looking at the charts on coinmarketcap wrong. The red line is UST-USD pair (scale shown on the left) and the orange one is UST-BTC but scale shown on the right. UST is not correlated with BTC at all. If it was, the line would be flat just like it was when UST was correlated with USD (pegged).
All it’s showing you is that the value of UST has been highly volatile when compared with both USD and even BTC. This is because of the loss of confidence in UST as a stablecoin. Compared to UST, both BTC and USD are tracking similarly because the issue is with UST itself, that is what’s driving the volatility. BTC also did decrease relative to USD though, which is why the orange line is below the red line slightly in the trough.
Thanks. You and others (quite a fair bit of private msgs) gave fair explanations in diff ways diff points. Got a lot of “the burn mechanism is working cant you see!” - like ya I see that and see the on chain data backing that up wasn’t questioning the burn mint mechanism.
I’m not questioning the mint burn mechanism. Questioning market forces as an explanation why UST shifts directly with BTC shifts. I got other answers here and elsewhere, thanks for reply though. Not a troll, if I were though a troll would also say not a troll so believe what you will
Drunkard bi polar ex programmer. Fact and should explain my own volatility, I ain’t been pegged 'cept by money, that keeps pegging me in unfortunate ways. Thanx puttin up with my questions.
Haha the last message made me laugh. Love you, hope the best for you and all #LUNAtics.