Why Did UST Depeg? On May 9, 2022, UST depegged and plunged fr | Ape Sharks® Calls 🦈

Why Did UST Depeg?
On May 9, 2022, UST depegged and plunged from $1 to a low of $0.68. At the time of writing, it is unclear whether UST will recover its peg.

After UST started trading slightly below its dollar peg, the Curve pool containing UST got progressively emptied — people were cashing out their UST for other stablecoins. At the same time, short selling of LUNA drove the price of LUNA, the collateral for UST, down. This downwards price pressure forced Terra to mint even more LUNA in an attempt to stop

the downwards spiral of UST. This diluted the price of LUNA but did nothing to restore the peg. Even a $1.5 billion sale of BTC out of Terra's treasury did not succeed in restoring faith in UST. Akin to a bank run, UST holders would rather take pennies on their UST than redeem it for LUNA.