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Comment by thematrixturtle | Hacker News Reader

It means a lot of people who paid $1 for an asset that was supposed to be worth $1 now have 40 cents, and these people are not very happy about it.

Also, that $1 valuation was supposed to be backed up by around $4 billion worth of bitcoin. If Terra (the company behind UST) starts selling bitcoin to prop up the valuation, the price of bitcoin will also tank.

And since markets anticipate that this is what will happen, the price of bitcoin is already tanking, which reduces the value of the no-longer-$4B hoard, which means they would need to sell more, and you can see where this is going.

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Much of those Bitcoin reserves have already been sold, causing most of the BTC price decrease.

>>> supposed to be backed up by around $4 billion worth of bitcoin.

That is uninformed and incorrect. UST is supported by promise of conversion into LUNA at $1 per UST, so it is supported by convertibility.

It is unwinding. I have not held either of these.

Those not just making stuff up can read the docs: https://www.terra.money/intro-to-terra

Incorrect. UST is also supported by LFG Bitcoin reserves intended to defend the peg, so the term "backed up" is entirely appropriate.

Here's Terra's CEO: "$UST with $10B+ in $BTC reserves will open a new monetary era of the Bitcoin standard"

https://twitter.com/stablekwon/status/1503296630396645376

More details: https://techcrunch.com/2022/04/06/terras-founder-plans-to-ba...

It's unclear how much BTC they actually amassed and how much, if any, is left. But at the end of the day, beyond all the techy handwaving, Luna was propped up by essentially Ponzi-like promise of 20% returns and now that has collapsed.

That's a short tweet and those who read the docs understand the tweet glosses over the mechanics. UST is backed by BTC reserves as much as $ is backed by gold in Fort Knox. Maybe in a way, but the gold conversion window closed and there never was a UST to BTC conversion window.

UST has convertibility by burning it at $1 into LUNA. Anchor protocol 20% did not seem sustainable. I looked into this contraption and stayed away from all of it. In hindsight, of course it all seems obvious.

TIL that people who hold "Luna" things are officially called "lunatics" by the very people who sell it to them. There's a hint in this somewhere.

It is perhaps a reference to a libertarian themed science fiction novel published in 1966, called "The Moon Is a Harsh Mistress". In it, inhabitants of the Moon were called Lunatics or Loonies.

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