Objective proof Anchor runoff does not equal UST depeg

Heres some good analysis from Pedro Ojeda on twitter:

After reading feel free to discuss but I think this is enough proof that we can call UST doomsayers and Anchor doomsayers baseless fud, they can all go to sleep now. Real world stress test accomplished with a successful and favorable outcome.


I don’t understand the point of this analysis. The author looks at $1.4bn of withdrawals. That’s around 10% of the $14bn Anchor deposits (pre-outflows). Just buy looking at the two numbers we already know that 90% of depositors (in terms amounts deposited) didn’t withdraw. Doing the same calculation for depositors in terms of count is interesting, but not clear to me how it adds value.

The events of Sunday proved that Anchor could survive a crisis. Does this prove it will survive all future crisis?

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Its survived all past crisises to date. The count and the type of accounts are what provide the objective proof that a runoff does not equal UST depeg. Also the fact the runoff occured (and is still ocurring) as we are nearing 3bn atm while UST is leading back to peg shows more evidence of this. UST has survived all previous crisis as well providing more backed evidence. Also mint/burn showed less luna was minted during the day of the event than burned in any given day providing yet further evidence against the idea that a anchor runoff would lead to a UST depeg.

all retail depositors slept during the event so where does the fear kick in?

UST survived this crisis because not much of it was burned (look at UST market cap, it didn’t go down). Why was it not burned? Somebody was buying. Who was buying, we don’t know. There is no transparency. Maybe it was entities close to the project, can’t know for sure. The billion dollar question is, will these actors keep buying in the future and how much these actors can buy before they run out of resources. This number should be kept well secret, otherwise an attacker could calculate precisely how much money they need to scuttle the system.

To me the bottom line is there are things we don’t know and not going to know. That’s always a risk. Which is fine, it’s just got to be aware of risks so we can weigh risk/reward.

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We do know, it was Jump capital. Transparent on the blockchain, they had agreed to a reflexivity prop passed back last year. They will commit to continue and so will other major stakeholders most likely. As the ecosystem grows they will need to contribute less and less.

Your right, it should be kept secret, for both legal and otherwise.


So this would have been a UST depeg then without Jump capital intervention?

Would feel a lot better if the system survived on its own.


While Jump Capital was a line of defense, it was / is not the last. I am quoting a tweet from the official twitter account of the White Whale Protocol (I spent a bit starting to paraphrase, but I am not going to be able to explain as well, sorry if against terms):

"Yesterday there was a brief depegging of [$UST] on Curve and multiple centralized exchanges i.e. Binance, Kucoin, and others…
White Whale is a DeFi protocol, we do not have a Binance account, and we do not have crosschain infrastructure to arb UST on Curve (which is on Ethereum), nor is it reasonable to expect us to have such things at this point. Instead, we run arb bots that defend the peg on the L1. This means we arb the validator level, where Luna is actually burned or minted, against the on-chain DEX’s. This is the peg’s core. So long as UST holds peg on-chain all other chains and CEX’s can arb it back from there.

Thankfully, yesterday UST never depegged on-chain, not even for a minute. Do you know why? It’s because of the high quality on-chain arbers on Terra.

This makes for a very efficient market. This is why the UST peg is always tight on-chain and for that matter why most other pegs and pairs in the ecosystem hold fairly true as well, because there are strong on-chain arbers on Terra who are doing their jobs.

Further, of the on-chain arbers, we are the only ones who have $30m+ of publicly known capital locked and loaded to defend the peg at any moment. So if UST would have lost peg at the L1 yesterday, we would have arbed it back. Thankfully it did not."



“UST never depegged on-chain.” So he means it never depegged on DEXs like TerraSwap? There is no way there to exchange UST to USD or for any other stablecoin, so how do you define the 1-1 peg on-chain? Does he mean the price against LUNA was somehow “fair?” It would help if they’d communicate this more clearly.

Also, $30 million seems like a very small amount when people defending the peg (officially or unofficially) were buying many hundreds of million of $ on Sunday.


Exactly, the $30M is laughable. Not even pocket change. A drop in an ocean. These small timers are inconsequential (and of little use as they don’t deal with real money USD and are not even able to get an account approved on any CEX, likely due to KYC or AML issues) when we are talking of Billions moving in a matter of hours.

What’s needed are serious arbitrageurs with a few Billion of real money USD in play, who add liquidity to CEXes, which is how money goes in and out (no one in their sane mind would want to sell UST for volatile LUNA, both as it’s risky, adds more loss, costs, and complexity). So far if all we have are small timers like these guys just messing around with Luna, we are in serious trouble and high risk. Liquidity on CEX is alarmingly low, and one sided - hence the never stable peg.


0.93 isn’t peg lost? lol k.

Also don’t you dare to move the goalpost. Peg isn’t lost because something something off chain something something on chain.


its reflexivity. right now supply exceeds demand so your selling at discount. Market maker comes to ask every day whats the discount on your capital and do you tell him “yes mr market maker, my discount is 15% because i hate making money” of course not. look in real estate, bonds, virtually any market is the same thing.

if my cad is dropping versus USD do i go oh shit its a bank run i should go into US? no, i go i want value for my capital so I’ll hold my CAD or buy things denominated in CAD such that I realise full value on my capital.

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Not the best example as CAD is not pegged to the USD.

For a currency that IS pegged to the USD, like HKD, if it was losing value vs. USD - that is, losing the peg - then indeed any responsible and risk-averse person’s instinct would be to sell it for USD and get to keep at least some money, instead of watching it devalued even more, and possibly go down to zero.

Incidentally, that may be the only way to make UST work. Do a range that is tolerated, vs. a hard peg. In that range, let arbitrageurs, like these small-timers with pocket change of $30M of play-money and inability to even deal in real money, do their thing. But the moment it gets to either the upper or the lower bound, then LFG, which needs to have sufficient reserves of REAL MONEY (not a risk-on asset like BTC, that is the worst possible thing to hold in case of a crypto market crash, as it’s so close correlated) to hold the peg no matter what. May be substitute the “real money” for gold, as while the price is not fixed, it’s far less volatile than BTC and anything crypto.

It’s beyond me why the stability fee got taken away. There should be a stability fee (re-)added for all Terra stablecoin transactions, which goes to fund the peg defense fund. Sort of like how every bank pays some pennies for every $10000 in deposits for the FDIC (or CDIC in your case, @atebites) insurance. Than bigger the ecosystem grows and more transactions there are, than bigger the defense fund grows. Until it’s grows to be 1:1 (in real money, non-volatile terms) of UST market cap, third-party funding is required to keep it standing and functioning.

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Their reasoning for having BTC for reserves instead of fiat is that fiat is expected to lose value over time. Kind of ironic if you ask me


I think it was OK to have crypto as reserve, but they obviously didn’t have enough of it, UST was undercollateralised.

It’s also interesting how they published the exact amount of reserves. Did this make it easier for whoever wanted to attack the peg? They could get an idea of the “defenses” and how long those defenses would last. In contrast, secretive USDT is still going strong $1, although that’s a slightly different concept of course as it claims to be a fully collateralised stablecoin.

I personally don’t believe undercollateralised algorithmic stablecoins can work long term. The solution to bank runs is deposit insurance. It’s like that everywhere in the developed world; insurance covers the full amount of deposits (up to limits).


It is, as that means that UST loses value over time also, since UST is pegged to the USD. It’s all relative and subjective, as it depends on what is the measure of “value” (if there is even is such an objective measure…may be some purchasing-power index, but there’s too many to choose from, so again not a single objective measure of “value”).

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No, not really. The argument was that backing a decentralized token with reserves subjected to the influence of centralized collateral makes no sense, since those reserves can be seized and the token rendered useless. Bitcoin on the other hand is not subjected to this influence.