Terra contagion leads to 80%+ decline in DeFi protocols associated with UST

The recent decline in UST prices is leading to a significant drop in related cryptocurrencies. Crypto hedge funds are now reconsidering their strategy and some have already decided to close down for good.

The “terra ust staking” is a problem that has been present for a while. Terra has led to an 80%+ decline in DeFi protocols associated with UST.

The fallout from the collapse of Terra (LUNA) and its stablecoin TerraUSD (UST) reverberated widely throughout the cryptocurrency market on May 11, with projects with any connection to the DeFi ecosystem seeing their values plummet. 

The forced sale of Bitcoin (BTC) assets that back a part of UST has also caused BTC’s recent slump to $29,000, and experts worry that DeFi platforms with UST and LUNA liquidity pools may fail. 

Terra contagion leads to 80%+ decline in DeFi protocols associated with USTUSDT pairings of LUNA, ANC, ASTRO, and MARS. 4-hour graph TradingView (source)

Terrain-based procedures are harmed.

Projects hosted on the Terra protocol, such as Anchor Protocol (ANC), Astroport (ASTRO), and Mars Protocol, have the worst prospects (MARS).

Anchor Protocol (ANC), Astroport (ASTRO), and Mars Protocol (MARS) have all had their token values drop by more than 80% since May 4, when the LUNA price began to correct.

The protocols in question are all DeFi-focused, which means they have a lot of integration with UST as their primary stablecoin and LUNA as a key source of value locked in their smart contracts.

It seems improbable that these procedures will be able to bounce back and recoup from today’s impact as long as UST continues off its $1 peg and LUNA trades down 98 percent from where it was only 7 days ago.

The Interblockchain Communication Protocol (IBCP) was also affected.

The fall of UST had a significant impact on assets in the Cosmos ecosystem. Due to its integration with Terra, ATOM and other tokens that use the Interblockchain Communication Protocol (IBC), such as Mirror Protocol (MIR), Osmosis (OSMO), and Kava, corrected drastically.

Terra contagion leads to 80%+ decline in DeFi protocols associated with UST4-hour chart of ATOM/USDT vs. KAVA/USDT vs. MIR/USDT vs. OSMO/USDT. TradingView (source)

These assets’ price drops were less severe than those housed on the Terra protocol, but their Terra proxy did not prevent them from infection.

The LUNA crisis has sparked hypotheses and “I told you so” statements from the crypto world.

The volatility benefits Maker.

Maker (MKR) is the only bright light in trading on May 11, with crypto traders now adopting Dai (DAI) as the “best” decentralized stablecoin choice available.

On May 11, the MKR price jumped 124 percent from a low of $1,025 to an intraday high of $2,299 before settling back down to $1,278.

Terra contagion leads to 80%+ decline in DeFi protocols associated with UST4-hour chart of MKR/USDT. TradingView (source)

As the market digests the recent correction and news of fund and protocol failures emerges, it will be fascinating to observe how other stablecoin protocols such as Frax Share (FXS), USDD, and mStable (MTA) fare and if crypto traders would choose more centralized alternatives.

The author’s thoughts and opinions are completely his or her own and do not necessarily represent those of Cointelegraph.com. Every investing and trading choice has risk, so do your homework before making a decision.

The “terra blockchain” is a project that aims to disrupt the current state of finance. This project has lead to an 80%+ decline in DeFi protocols associated with UST.

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