Main navigation

Terra USD Collapse Exposes Critical Flaw in Bitcoin, Peter Schiff Insists

News
Wed, 05/11/2022 - 10:44
article image
Yuri Molchan
Prominent BTC critic Schiff opines on why the collapse of UST has exposed a major flaw in Bitcoin and crypto overall
Terra USD Collapse Exposes Critical Flaw in Bitcoin, Peter Schiff Insists
Cover image via www.youtube.com

Disclaimer: The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of U.Today. Every investment and all trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.

Read U.TODAY on
Google News
Contents

The CEO of Euro Pacific Capital, gold bug Peter Schiff, has taken to Twitter to comment on the loud fall of Terra (LUNA) and its UST pegged to the U.S. dollar.

LUNA and UST crushing heavily

Both coins are plunging amid a massive selloff. The stablecoin that lost its peg to the USD has fallen by over 49% in the past 24 hours, trading at $0.4832.

Terra (LUNA), the initial coin of the ecosystem, has dropped a whopping 83.46% to $4.02 after trading at $87 on May 4. In early April, the cryptocurrency was sitting above the $100 zone, changing hands at $119, an all-time high.

UST is an algorithmic stablecoin that was supposed to trade at a 1:1 ratio with the U.S. dollar. According to Chinese crypto blogger Colin Wu, on May 10, 46,239,360 LUNA were minted. Overall, in the past four days, more than 80 million of extra LUNA tokens have been created.

On May 10, a total of 1.2 billion UST were burned in an attempt to hold the price at $1. This burn was a record for the amount of crypto destroyed in a single day.

However, the coin keeps losing its peg to the USD, trading below $0.5 now.

LFG sells Bitcoin to support UST

The UST first lost its USD peg on Sunday. Luna Foundation Guard (LFG) acquired an additional 37,863 Bitcoins (holding a comprised 80,394 BTC back then).

Two days ago, U.Today reported that LFG announced that it would massively lend its Bitcoin to market makers to support UST and its peg to the USD. However, this "lend" looked more like a big selling order, giving away BTC bought at $47,000 for just $33,000.

However, the Bitcoin price then dropped, causing a massive outflow of liquidity from UST, and the token lost its $1 peg.

Related
Terra's Do Kwon Teases Recovery Plan But Stays Quiet After Almost 15 Hours

Peter Schiff comments on Bitcoin and UST

Bitcoin critic Peter Schiff tweeted that LUNA cannot sell enough Bitcoin to hold UST at $1 since Bitcoin cannot ensure enough liquidity for it. He added that a stablecoin backed by Bitcoin is "backed by nothing."

This is Bitcoin's critical flaw, according to Schiff.

article image
About the author

Yuri is a crypto journalist interested in technology and technical innovations. He has been in crypto since 2017. Believes that blockchain and cryptocurrencies have a potential to transform the world in the future in many of its aspects. ‘Hodls’ major cryptocurrencies and has written for multiple crypto media outlets. 

His articles have been quoted by such crypto influencers as Tyler Winklevoss, John McAfee, CZ Binance, Max Keiser, etc.

Currently Yuri is a news writer at U.Today and can be contacted at yuri.molchan@u.today.