LFG $3 billion Bitcoin reserve lasted 2 days

Just for the record, so people understand the forces at work in a crisis, the LFG $3 BILLION Bitcoin reserve, which was touted as the protector of UST / Terra / and the universe for eternity lasted two days.


The BTC reserve was NOT worth any specific $ (USD) amount. It’s denominated in Bitcoin. It’s one of the worst possible reserve “assets” to have in case of a crypto market crash, which is just what would expose UST to the highest depeg risk, as the actual $ (USD) value of the reserve then already has went down significantly, and will go down even more as LFG sells it off. I mean, if BTC crashed down to $7000, the BTC reserve (that is now - poof! - gone) would have been worth only a few 100 $ Million, not anything in Bilions.

The chart that they are using which shows the reserve value in USD is highly unethical and misleading, as it leads some to think that the reserves are held in USD. They are NOT! That is what regulators need to reign in such outright deceptive practices. That chart by itself should be a violation of the law and should result in Kwon and LFG going to prison for massive intentional misleading of the market and customers. (How the chart should - and the only way it really could ethically be - done, is to show the value IN BTC.)

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It was given to a order book market maker wasn’t it? I think that liquidity is just deployed recently. They still own the entire reserves just it’s lent out.

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The BTC reserves are meant to arb the price of UST with Bitcoin, USD value be damned, if all goes well when this is over, and it will be over sometime, if the market maker did it’s job right we should get back even more BTC than before, that news alone would restore some faith… now this won’t happen this week, or the next, it will take time and requires UST to regain peg.

It may never happen and I’m well aware, but the best case scenario for Luna holders right now is the peg restored and the BTC returned + interest from arbing the peg, some will claim it was at the expense of LUNA holder but it’s just how the system is designed, mass exodus will lead to profit making to those willing to arb the peg.

If it’s so, the market makers are not doing a very good job (or are just taking some very juicy profits) as there was a second big dip in the last few hours, while the Anchor deposits have remained generally steady. In other words, seems to be less money going out (at least out of Anchor, which I think is indicative towards USD greater whole), yet still it dipped again.

Looking at the Anchor total deposits chart, I thought the worst is over - more than 1/2 funds were withdrawn yesterday, there was a big dip, and the peg was back in the 0.90s. But, alas, it went down - way down - again.

It’s all about human emotion, something that is very hard to manage, and that has tremendous momentum. After this even, even if the peg is restored, there will be a lot of faith lost in Terra. The silver lining is, it means less deposits in Anchor - and more borrowers (as if the UST may depeg, then the loan repayment may be worth less in USD), and a higher chance of the YR lasting, and even starting to grow.

These are OTC market makers they dont buy it at 80 or 90 cents they buy it at 75 and 60 cents and then sell again at 80 or 90 cents and will keep doing it until the market is flush, then they will shift out of the zone once they’re finished with the range.