Crypto researcher unpacks why UST broke down and what happens next

Episode 41 of Season 4 of The Scoop was recorded remotely with The Block’s Frank Chaparro and Mika Honkasalo, Crypto Researcher.

Listen below, and subscribe to The Scoop on AppleSpotifyGoogle PodcastsStitcher or wherever you listen to podcasts. Email feedback and revision requests to [email protected]

Bitcoin traded below $30,000 on Monday, amid market uncertainty brought about by the ‘depegging' of UST—an algorithmic stablecoin whose value is supposed to remain equivalent to $1.

At publication, UST is trading at $0.92, although the ‘stablecoin’ saw lows of $0.6050 on the Binance UST/USDT trading pair.

In this breaking episode of The Scoop, host Frank Chaparro spoke with crypto researcher Mika Honkasalo, who appeared on the podcast to provide a detailed look at how the UST drama is unfolding.

As Honkasalo explained, while UST has experienced depegging before, this time around is structurally different:

“I think people at first didn't really realize that it would be a real thing, because they had seen something similar before and they didn't realize that the structure of the market had become a lot more averse to UST than it previously had. And I think what you're seeing today is sort of that just escalating or going further.”

Although the Luna Foundation Guard announced plans yesterday to support the UST peg with $1.5 billion worth of assets, whether or not UST returns to its peg will likely come down to whether the buyers or sellers win out.

As Honkasalo noted during the interview,

“Whether or not it maintains the peg today is very much a question of: if the sellers sort of run out of tokens and the buyers have more, the buyers will live to fight another day here in the mid-term.”

As for the future fate of Luna and UST, Honkasalo thinks much of its success will rest on macro forces outside of its control.

“I think that if the market turns positive, it will be much easier to keep the whole Luna ecosystem going. But if it continues to be more negative than this, the next wave of sells could be even much worse.”

During this episode, Chaparro and Honkasalo also discuss:

  • Market catalysts in crypto
  • Changes in venture capital fund flows
  • Layer-2 scaling solutions

This episode is brought to you by our sponsors FireblocksCoinbase Prime & Cross River
Fireblocks is an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets. Fireblocks enables exchanges, lending desks, custodians, banks, trading desks, and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. Fireblocks serves over 725 financial institutions, has secured the transfer of over $1.5 trillion in digital assets, and has a unique insurance policy that covers assets in storage & transit. For more information, please visit www.fireblocks.com.

About Coinbase Prime
Coinbase Prime is an integrated solution that provides institutional investors with an advanced trading platform, secure custody, and prime services to manage all their crypto assets in one place. Coinbase Prime fully integrates crypto trading and custody on a single platform, and gives clients the best all-in pricing in their network using their proprietary Smart Order Router and algorithmic execution. For more information, visit www.coinbase.com/prime.

About Cross River
Cross River is powering today’s most innovative crypto companies, with banking and payments solutions you can rely on, including fiat on/off ramp solutions. Whether you are a crypto exchange, NFT marketplace, or wallet, Cross River’s API-based, all-in-one platform enables banking as a service, ACH & wire transfers, push-to-card disbursements, real-time payments, and virtual accounts and subledgers. Request your fiat on/off ramp solution now at crossriver.com/crypto.


© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Davis Quinton covers topics ranging from digital assets to financial markets as a Podcast Editorial Fellow at The Block. When the global pandemic disrupted his progression through law school in 2020, Davis discovered the digital asset space for the first time. Davis started at The Block in early 2022 and works closely with leaders across divisions to produce content for The Block’s flagship podcast, The Scoop. He previously held positions at Wells Fargo and Finsbury Glover Hering. He holds a degree in Social Research & Public Policy from New York University in Abu Dhabi.