Some members of the cryptocurrency community have equated the chaos unfolding within Terra’s (CRYPTO: LUNA) ecosystem to the Lehman Brothers collapse.
What Happened: On Monday, Terra’s algorithmic stablecoin TerraUSD (CRYPTO: UST) lost its peg to the U.S. dollar and fell to $0.79.
Terra’s Luna Foundation Guard (LFG) then proceeded to sell the entire $1.3 billion worth of its Bitcoin reserves in an attempt to bring LUNA back to parity with UST, adding a significant amount of sell pressure to an already tumbling Bitcoin.
Market participants took to Twitter to voice their concerns over the past day’s events.
There is a rumor spreading about Jump, Alameda, etc. providing another $2B to “bail out” UST. Whether this rumor is true or not, it makes perfect sense for them to spread. The biggest question here is, even if they can get it to $1 by some miracle, the trust is irreversibly gone
— Larry Cermak (@lawmaster) May 10, 2022
LFG looks awfully similar to Lehman Brothers right now.
— Mudit Gupta (@Mudit__Gupta) May 10, 2022
Almeda is Warren Buffett and Jump might go into AIG's direction.
Who could have predicted that 2022 financial crisis might be triggered by internet money managed by entity called LFG.
it's so hilarious we recreate an even worse ponzi system which obviously not anti-fragile to even 1-sigma or 2-sigma event and call it better than USD, etc.,
— DCinvestor.eth ⌐◨-◨ (@iamDCinvestor) May 10, 2022
right down to some guy sending BTC from on-chain to a centralized exchange to do [REDACTED] with it
No matter how this ends, I don't want people to call UST decentralized again. Even the little collateral backing it has is intransparent and controlled by a single party. Used to perform discretionary open market operations. This is like 10x worse than the Fed.
— Hasu�🤖 (@hasufl) May 9, 2022
“The whole concept of creating a stable asset by backing it with volatile assets seems completely insane,” said Alexandre Lores, founder of The Latest Block.
Meanwhile, Erik Yakes, author of Bitcoin and the Monetary Revolution, suggested that UST not having a central bank to “bail them out” was actually a good thing.
“This is how the market should be. When banks fail, they fail, because you can't print more Bitcoin,” he said.
At the time of writing, UST was still yet to stabilize and reclaim its peg. Some major crypto exchanges, including Binance, suspended UST and LUNA withdrawals.
If you want to know what March 2020 was like, just imagine the nuke on $LUNA today but across every single coin with $BTC dropping a 40% bomb into lows no one could've imagined... while exchanges were freezing left and right.
— Loma (@LomahCrypto) May 10, 2022
