The ripple effect of Terra’s (LUNA), and TerraUSD’s (UST) collapse has spread widely across cryptocurrency markets on May 11. Projects that have any type of association with DeFi have seen their prices drop.
BTC’s recent drop to $29,000 was also influenced by the forced sale of Bitcoin (BTC), which backs a portion UST. Analysts fear that DeFi platforms with liquidity pools primarily made up of UST or LUNA will fail.
USDT pairings: LUNA, ANC and ASTRO. 4-hour chart. Source: TradingView
Terra-based protocols are not recommended.
The Terra Protocol hosts the most dire projects, including Anchor Protocol (ANC), Astroport(ASTRO) or Mars Protocol (MARS).
As you can see, Anchor Protocol (ANC), Astroport(ASTRO) and Mars Protocol [MARS] saw their token prices drop more than 80% from May 4, when the LUNA price corrected.
These protocols are all DeFi-focused. They had strong integration with UST as their main stablecoin for liquidity pairs and LUNA to lock their value on smart contracts.
It is unlikely that these protocols can bounce back from today’s loss as long as UST trades below its $1 peg, and LUNA trades at 98% of the level it was 7 days ago.
Also, the Interblockchain Communication Protocol was hit.
The collapse of UST also caused severe damage to assets in the Cosmos ecosystem. AtOM and other tokens such as Mirror Protocol (MIR), Osmosis(OSMO), and Kava, which use the Interblockchain Communication Protocol [IBC], were all affected by Terra’s integration.
ATOM/USDT vs. KAVA/USDT vs. MIR/USDT vs. OSMO/USDT 4-hour chart. TradingView
Although the price declines of these assets were less severe than those on Terra Protocol, their proxy to Terra did not protect them from contagion.
Related: LUNA meltdown sparks theories, told-you sos from the crypto community
Volatility benefits the maker
Maker (MKR), the bright spot in crypto trading on May 11, is Dai (DAI), the “best” decentralized stablecoin in the market.
MKR price spiked 124% during trading on May 11. It went from $1,025 to an intraday low of $1,025 before falling to $1,278.
MKR/USDT 4-hour chart. Source: TradingView
It will be interesting to watch how the market reacts to the recent correction and the news about fund and protocol collapses. Also, it will be fascinating to see if other stablecoin protocols such as Frax Share (FXS), USDD, and mStable(MTA) do and whether crypto traders will abandon these projects in favor of more centralized options.
com. You should do your research before making any investment or trading decision.