Terra’s (UST) recent “price action” has had a devastating across-the-board effect on those projects banking on the stablecoin’s success. And with $17.5 billion wiped from the combined Terraverse, prospects for any subsequent recovery look grim.
No project linked to Do Kwan’s Terra network has been safe. That’s games, payments apps, lotteries, arbitrage tools, synthetic asset DEXs, and “yield farms,” all with typically sober sounding names. These include StarTerra, Pylon, LoTerra, Astroport, DogeKwon Terra, and Mars Protocol.
As the world watched, Terra’s algorithmic stablecoin had the chance to demonstrate its nimble price stabilization technique during a surprise fire drill last weekend, and it went… not great.
And things continued to get a lot more “not great” in the following days.
Terra ecosystem projects proffer wildly different purposes, uses, value propositions, technology, operators, and communities, with one shared belief: each assumes the world’s (once) fourth largest stablecoin will be, well, stable.
This begs the question: if a dollar-pegged stablecoin falls (below $0.15) in the woods and the entire ecosystem falls along with it… can it ever really recover?
With friends like these who needs DeFi?
Let’s check in and see who’s on the “Bad Case of the Mondays” leaderboard, shall we?
Project: Anchor Protocol
Description: Lending and borrowing protocol offering “low volatility” for “risk-averse investors”
Governance token ticker: ANC
Market cap loss since Monday: $446 million, or 83%
Project: Mirror Protocol
Description: “Synthetic” asset tracking protocol
Governance token ticker: MIR
Market cap loss since Monday: $81 million, or 56%
Description: DEX on Terra blockchain with a novel AMM
Governance token ticker: ASTRO
Market cap loss since Monday: $210 million, or 87%
Project: Pylon Protocol
Description: DeFi framework for “principal-protected, yield based products and services”
Governance token ticker: MINE
Market cap losses since Monday: $39 million, or 63%
Description: Gamified launchpad featuring Play2Earn, NFT “games” and multi-asset staking
Governance token ticker: STT
Market cap losses since Monday: $17 million, or 59%
Description: Suite of Terra Based dApps
Governance token ticker: KUJI
Market cap losses since Monday: $37 million, or 82%
Promised the moon? Come down to Earth
What does this mean for projects with the stability of Terra hard-coded into their DNA?
We might expect that a brief de-peg and whiplash volatility would affect these notably dissimilar projects in a variety of ways.
Based on our research, the decline in the top six projects alone produced ~$840 million of loss in combined market capitalization — strongly correlated to Terra’s performance over the same period.
Final destination — Nebula’s prescient disembarking
Nebula Protocol, which styles itself as “DeFi’s most flexible and efficient passive asset management protocol,” displayed its limberness Tuesday, announcing via Twitter it was scuttling its May 10 launch “given the events that have transpired.”
Terra, Luna, and the ecosystem of dependent web3 projects that constitute the Terraverse may yet walk away from this crash — proving this past weekend was just a bump on the road to algo-currency dominance for Terraform Labs.
However, at the time of writing, UST was trading at $0.63 and Luna at $0.027, with none of Terra’s companions yet recovered from the precipitous decline in their patron technology. This leaves open the real possibility that $NEB alone will survive this calamity and be forced to watch as its classmates meet their grisly fate… one by one.