Terra LUNA Price Prediction
Terra’s UST stablecoin has experienced a significant de-pegging from the USD since the beginning of the week. LUNA, Terra’s native cryptocurrency, has corrected by more than 80% in the last four days.
In the midst of the carnage, speculation has grown that the UST stablecoin was the target of a coordinated attack. According to the initial report, a single attacker sold $285 million in UST stablecoins on Curve and Binance.
The attacker, on the other hand, could have made more than $800 million from this coordinated attack. Onchain Wizard, a popular on-chain analyst on Twitter, recently published a thread explaining the possibility of how the attacker could have exploited the LUNA-UST-BTC ecosystem.
Terra’s parent company, the Luna Foundation Guard (LFG), announced in March that it will purchase $10 billion in Bitcoin reserves to ensure the stability of its UST stablecoin. According to Onchain Wizard, this is when the attacker became active. In addition, the 4pool Frax announcement for UST aided the attacker in carrying out the strategy. Making an educated guess, he continues:
The UST Attack's Real Game Begins
As a result, by April 11, the attacker had amassed $4.2 billion in Bitcoin short positions. At the same time, the attacker builds a $1 billion over-the-counter (OTC) position in UST. Now is the time to liquidate the UST while also shorting Bitcoin, knowing that LFG will sell its Bitcoins to protect the UST peg.
In anticipation of 4pool, LFG removes $150 million in liquidity. On May 8, there will be a liquidity pull. Simultaneously, the attacker uses $350 million in UST to drain the Curve’s liquidity. This begins to de-peg the UST, lowering it to $0.97.
Later, the Luna Foundation Guard (LFG) begins selling Bitcoin from its reserves in order to protect the peg. Bitcoin is under pressure as a result of this. Now that the Curve’s liquidity has been depleted, the attacker begins offloading the remaining $650 million from the $1 billion OTC UST position on Binance. According to Onchain Wizard:
With strong UST liquidations, the LUNA price begins to fall due to Terra’s algorithmic mechanism. Bitcoin’s price has dropped from $42K to $32K in the last month.
If the attacker had covered his/her 100K BTC short positions at $32K, they would have made more than $950 million. Of course, the attacker would have suffered some losses on the UST dump, but they would have been minor. According to Onchain Wizard:
The analyst goes on to explain that any short on LUNA would have resulted in additional profits for the attacker. Once again, we’d like to thank Onchain Wizard for this insightful thread.