TerraUSDFamous Bitcoin enemy commenting on the collapse of . Peter Schiffthinks that this collapse has revealed its critical flaw in cryptocurrencies, especially Bitcoin.
Peter Schiff, CEO of Euro Pacific Capital, commented on the strong decline of Terra (LUNA) and the pegging of the UST to the US dollar.
Taking to Twitter to share his thoughts, Schiff stated that LUNA will not be able to sell enough Bitcoin to keep UST at $1 because Bitcoin cannot provide enough liquidity for it.
Adding that a stablecoin backed by Bitcoin is not backed by anything, Schiff said that doing so would destroy the value of Bitcoin reserves and crash the market.
#TerraUSD has crashed below 40¢. The collapse exposes a critical flaw in #Bitcoin. #Luna can’t sell enough Bitcoin from its reserves to stabilize #TOP at 1$ due to a lack of real liquidity in Bitcoin. Doing so would crash the market destroying the value of its Bitcoin reserves.
— Peter Schiff (@PeterSchiff) May 11, 2022
Terra (LUNA), the first coin of the ecosystem, was trading at $87 on May 4, falling to $0.69 with a record 98% drop. However, at the beginning of April, it was trading above the $100 zone.
LUNA And UST Dying!
Both coins continue to drop in the midst of a big sell-off.
UST, on the other hand, is an algorithmic stablecoin that is expected to be traded 1:1 against the US dollar. According to Chinese crypto blogger Colin Wu, on May 10, 46,239,360 LUNAs were minted. Overall, over 80 million extra LUNA tokens have been generated in the last four days.
46,239,360 LUNAs were issued on May 10, and over 80 million additional LUNAs have been issued in the past 4d. UST supply burned more than 1.89 billion for 4d, and on May 10, 1.2 billion UST was burned, setting a new record for single-day destruction. https://t.co/DFHJxNqF0w
— Wu Blockchain (@WuBlockchain) May 11, 2022
A total of 1.2 billion UST was burned on May 10 to keep the price at $1. This meant a record for the amount of crypto burned on the same day.
Luna Foundation Guard Sells Bitcoin to Support UST
The UST first lost the USD peg on Sunday. Luna Foundation Guard (LFG) has purchased an additional 37,863 Bitcoins.
Two days ago, it was learned that LFG announced that it will largely lend its Bitcoin to market makers to support the UST and its rate to USD.
Shortly after that, the Bitcoin price dropped, causing a massive liquidity outflow from the UST, thus losing the $1 per token token.