HomeCryptoSnapshot of the crypto world with a look at Terra and Luna

Snapshot of the crypto world with a look at Terra and Luna

As the crypto world comes to terms with volatility, Terra and Luna return to the headlines, but this time as victims due to a growing suspicion that Sam Bankman-Fried played his part in the collapse of the price of Terra-Luna and UST as well. 

Prosecutors have collected all available data about the Terra-Luna ecosystem debacle. 

The investigation into the failed crypto ecosystem: Terra-Luna

It is clear from the investigation that there were no significant shorts in the days leading up to the debacle and that the open interest on Luna and UST perpetual futures on Binance and FTX were examined correctly.

Authorities concluded that if Terra-Luna suffered manipulation this could in no way have been repeated over a long period of time but rather was the result of a small action or multiple small actions that caused a chain reaction leading to the stablecoin debacle. 

Given that the stablecoin’s loss of value began on the 9th of May, any external intervention that changed the fortunes must have occurred earlier. 

The month of April this year was characterized by very volatile open interest and LUNA funding rates, which suggests to us that traders had no directionality and bet on both short and long trades believing that both had potential.

OI rose 30% in the early days of April and then stalled at parity toward the end of the month with rates also experiencing very large swings with no clear line. 

On the second Sunday in May, funding rates went below 0.04% with OI essentially stationary.

The hype on the UST-USD contract in the FTX platform had increased slowly but steadily from $15-20 million at the beginning of the fourth month of the year to $23 million before the UST meltdown.

A small wake-up call sounded on Saturday, 7 May 2022 when open interest had increased by $10 million as funding rates turned red. 

Even within the next two days of getting into the thick of de-pegging Luna and UST, OI and rates had already gone crazy making it essentially impossible to determine ad hoc interference to plunge the stablecoin.

However, the fact that classic digital currency manipulation did not emerge, it is possible that new schemes were used for the same ends and perhaps a few targeted interventions were all it took to unleash the Fury of the markets. 

Do Kwon, the co-founder of Terra appears to have relocated to Serbia in the meantime at least according to some rumors and would be looking for an escape route from the affair while trying to prove his innocence at arm’s length from law enforcement. 

Upon the occurrence of traumatic market events such as those that happened to Terra or in the case of Three Arrow Capital or even FTX cryptocurrencies tend to correlate with each other reinforcing ties but in this case, BTC and BNB did not suffer this fate highlighting a clear anomaly. 

The correlation between BTC and BNB (Binance’s token) went to a mere +0.4% touching a three-year low. 

Binance, the largest player among crypto exchanges in the world with the introduction of Proof of Reserve has brought calm to the cryptocurrency world pervaded by fear, and this has also benefited BNB. 

Bitcoin meanwhile stands at $16,803 remaining almost stationary below the 0.38 Fibonacci, in terms of correlation with major altcoins such as DOGE, MATIC, ADA and SOL remains positive this month.

Altcoin volumes have not suffered major shocks at least on the most relevant centralized exchanges showing strength after the FTX storm. 

Volumes remain 37% and there has not been the classic exodus toward more capitalized digital currencies such as BTC and ETH that is typical of periods of uncertainty. 

After Terra’s collapse, for a few months, the volume of the most capitalized currencies (Bitcoin and Ethereum above all) plunged from 59% to 27% while altcoins held their own. 

FTX’s rout has not been discounted more despite being of larger proportions since much of the risk was calculated already in the collapse of Terra this summer.

The leadership in market capitalization remains firmly in the hands of BTC, which despite Ethereum’s attack following the switch from Proof of Work to Proof of Stake failed to undermine the major cryptocurrency. 

A very interesting fact staying on the stablecoin theme is the depeg of Tron’s USDD now trading below $0.97, which corresponds to the lowest level ever touched since June.

Tron’s USDD, which had an equal model to Terra’s UST, has now switched to an overcollateralized approach and is backed by a 200% collateral ratio.

Despite the extensive guarantees, Tron and its ecosystem are under the magnifying glass that has suffered from the USDD depeg. 

TRX, Tron’s token has been shorted by perpetual futures investors bringing volume from $50 million to $100 million with rates in the negative zone.

The last month has been a disastrous one for the cryptocurrency sector due to the FTX case involving the scammer (now in handcuffs) Sam Bankman-Fried and the Spread has been a testament to this by making BTC’s triple that of stocks. 

Volatility, however, seems to have given a breather by decreasing its intensity equating that of BTC to that of Nasdaq. 

Excluding the traumas of FTX, Terra, and Three Arrows Capital, Bitcoin has been closely correlated with macro events for more than a year. 

Meanwhile, as mentioned earlier, FTX co-founder Sam Bankman-Fried was arrested in the Bahamas on the command of the United States of America awaiting extradition and trial for the fraudulent scheme set up to the detriment of American investors and others. 

George Michael Belardinelli
George Michael Belardinelli
A former corporate manager at Carifac Spa and later at Veneto Banca Scpa, blogger and Rhumière, over the years he has become passionate about philosophy and the opportunities that innovation and the media make available to us, in particular the metaverse and augmented reality