Terra, the Luna crisis

 Recently, bad news from TERRA/LUNA has rocked the market.

Haybit's deposit product is a structure in which digital assets are loaned to institutions and Diffie protocols and funds are raised, and the related operation status is continuously monitored closely after pre-validation.

I would like to introduce the background of this TERRA/LUNA incident and Haybit's prompt response.

UST, what's the Luna situation?

Terra is a blockchain project founded by Kwon Hyung, CEO of Apple engineer.

As the craze for decentralized finance (D-Fi) intensified, D-Fi deposits and market capitalization of TERRA (UST), which aims for a global payment system, grew rapidly.

Due to the nature of stable coins that maintain value by controlling supply by algorithms and fixing (peg) them to legal currency such as dollars, problems arise when this price linkage structure collapses.

UST originally advocated stable coins pegged at $1 and a reserve currency called Luna was used to maintain the price. 

When the UST price falls, the price is adjusted by issuing Luna, and when the UST price rises, Luna is incinerated to deliberately adjust the price.

However, as the market continued to decline, UST prices fell significantly, and for this reason, they continued to issue Luna to defend the price, but even this did not work well, so they could not avoid the "death spiral."

Luna, which was the top 10 digital asset market cap, plunged about 99% in just a week, trading below $1 on May 12 afternoon (based on overseas exchanges, excluding blocked exchange prices).

Will Haybit deposit products be okay?

In conclusion, Haybit was not hit hard by this UST incident.

Harvest, a Haybit deposit product, operates the product through Defi and other partner operators.

Some of the Defi were being deposited through the Terra Ecosystem's Anchor Protocol, but as mentioned earlier, there was an internal control process that continuously monitored the status of operations, which quickly lost money early in the incident.

As such, Haybit's deposit products are always responding to possible risks, so they are operating stably because they can minimize risks or secure sufficient interest resources.

We also continuously monitor the asset status of other partner operators other than Terra to check for abnormalities, and confirm that there is no problem with customer deposit assets and the company's financial situation.

In addition, when external threats are detected, the relevant situation is transparent and immediately disclosed to relieve customers' anxiety.

The Terra incident seems to be raising concerns about the stable coin Tether (USDT). For Tether (USDT), unlike UST, the Tether Foundation is a stable coin with a high percentage of reserves. If the Tether Foundation has enough reserves, it is not expected to see a sharp drop like the UST, and although it has fluctuated at one point due to a series of concerns, it has now regained stability.

Tether also said in a statement, "I don't think the UST situation means anything to the centralized stable coin market," adding, "It's a completely different type of asset from us."

Apart from these statements, Haybit continues to monitor the price status of tethers. Please refer to the last post for additional information on the status of the tether's reserves and stability.

Haybit will continue to keep a close eye on other threats, including the UST incident, so that those who want to hold digital assets for a long time regardless of price volatility can increase their assets with confidence.

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