After @Remi_Tetot stated that he got tired of the same old $UST death spiral threadooors, the threadooors started a "new" FUD.

-> What happens if $UST 's market cap is higher than $LUNA 's?

A thread

So what exactly is this FUD about?
Basically the thought behind it is, that $UST becomes uncollateralized once it surpasses the market cap of $LUNA

Here’s something that will make some of those fudders angry: $UST is not, and will never be collateralized by $LUNA

Now you may think: wait a minute this ponzi is not backed by anything, lemme short it to zero!!

Hold your horses anon, read this thread till the end before you burn your money.

For you to understand why $UST is stable you have to understand the mint and burn mechanism.

Basically for every $UST 1$ worth of $LUNA has to be burned, and vice versa (yes burned, not in @stablekwon 's personal wallet. Kek @JackNiewold ).

The stability of this peg used to basically rely on two different factors.

1. Arbitrageurs making money
2. Liquidity

1. arbitrageurs should be simple to understand. Once $UST is off peg they can go to terra station and keep the profit.

2. Liquidity is a bit more difficult to understand.

Anon do you know what the key factor of stability is? It’s not the arbitrageurs or the community.

It’s the liquidity. You could have a 1:1 backed stablecoin like $TUSD and it could still be off peg, when someone is selling it when there’s no liquidity.

So what exactly has been done in this regard since the may crash in 2021? And why did $UST depeg back then?

It depegged because there was a flash crash, and guess what? There wasn’t enough liquidity for all the people 1. getting liquidated and 2. exiting $UST out of fear. This process did indeed cause a sort of "death spiral" and $UST was at 93cents at it’s lowest.

Back then people borrowing at @anchor_protocol solely relied on whales to liquidate their position for them, this resulted in 30% premiums (30% below mark price). So naturally what was the most profitable thing to do? Yes sell it and causing a liquidation cascade.

So what has been done since then? Well @TeamKujira is managing the liquidations. Now anyone can bid on liquidations and liquidate the position of a degen. As you can see below, there are roughly 47 million $UST waiting to liquidate someone at @anchor_protocol and you may have

Noticed that those bids are mostly in the 3-6% range. Meaning that degens get liquidated at a way lower premium and people are less incentivised to sell their $LUNA instantly.

(PS.: @TeamKujira is coming to a EVM compatible chain near you)

What else has been done? @WhiteWhaleTerra is constantly arbing $UST and keeping the peg where it should be.

What has been done for the liquidity aspect? You may or may not have heard of the 4pool. It’s a cooperation between @fraxfinance and @terra_money ensuring that its the

Most liquid stablecoin pool on @CurveFinance with $UST $FRAX $USDT $USDC

The thing about this pool is that it’s a AMM, meaning if $UST or any other stablecoin of this pool is off peg, the other stablecoins will be bought/sold to bring it back to 1.

Ok, you now have a bit more knowledge about $UST but maybe you’re still concerned about the market cap differences, as @LynAldenContact has pointed out: https://twitter.com/lynaldencontact/status/1520752169623998468

Anon… $LUNA is completely reflexive, meaning that the market cap of it is irrelevant. As @crypto_rudd has pointed out, check out his thoughts (backed by math) on his substack. https://twitter.com/crypto_rudd/status/1520798524908187648

You’re still not convinced? As a matter of fact, $LUNA 's market cap has been beneath the market cap of $UST and guess what… It didn’t die

Wait that’s not enough for you? Ok anon, @LFG_org is accumulating $BTC just so you could redeem your $UST for $BTC if you don’t trust

The peg anymore. If you’re still ignorant to the fact that @stablekwon is doing everything he can to ensure you have exit liquidity, just so you can exit the whole ecosystem without a huge loss. And you still coping?IDK what to tell you.

But but but muh bank run!!!!

Anon… you are worried about the possibility that when everyone at the same time want’s to exit $UST it will collapse?

Ok, think this through… what would happen if everyone who holds your coin or even stock of choice decides to sell?

Yes that’s right it goes to zero. Yes even the most liquid crypto out there, #Bitcoin would also go to zero if that happens, even a stock like $AAPL so please for the love of your money, don’t speculate on a bank run xD

If you still think that $LUNA is a scam, then do yourself a favor and short it :)

A tip for you anon: you can short $UST on @EdgeProtocol simply supply it and borrow $UST against it and sell it for $USDC or whatever on @astroport_fi have fun waiting for nothing

If you have any questions, or disagree with me, just leave a comment and we will discuss

Cc: @danku_r @crypto_rudd @lejimmy @tundra_v1 @Remi_Tetot @Cephii1 @CryptoHarry_ @Shigeo808 @cy_coleman