Terra contagion leads to more than 80% drop in UST-connected DeFi protocols

The fallout from the collapse of Terra (LUNA) and its stablecoin TerraUSD (UST) spread widely across the cryptocurrency market on May 11 as the prices of projects with any connection to the DeFi ecosystem were pushed up.

The forced sale of Bitcoin (BTC) holdings that support part of UST also influenced BTC’s current drop to $29,000 and analysts fear DeFi platforms with liquidity pools mainly composed of UST and LUNA will collapse .

LUNA, ANC, ASTRO and MARS in USDT pairings. 4 hour chart. Source: TradingView

Terra-based protocols suffer

Projects with the bleakest prospects are those hosted on the Terra Protocol, including Anchor Protocol (ANC), Astroport (ASTRO), and Mars Protocol (MARS).

As shown in the chart above, the Anchor Protocol (ANC), Astroport (ASTRO) and Mars Protocol (MARS) token prices are down more than 80% since May 4th, when LUNA price first started correcting. broken into.

The protocols in question are all DeFi-aligned, meaning they had strong integration with UST as the main stablecoin for their liquidity pairs, as well as with LUNA as a key source of value for their smart contracts.

As long as UST breaks away from its $1 peg and LUNA is trading 98% lower than it was just 7 days ago, these protocols are unlikely to be able to bounce and recover from today’s impact.

The Interblockchain Communication Protocol was also hit

Assets in the Cosmos ecosystem have also been hit hard by the collapse of UST. ATOM and other tokens like Mirror Protocol (MIR), Osmosis (OSMO) and Kava using Interblockchain Communication Protocol (IBC) have been heavily corrected due to their integration with Terra.

ATOM/USDT vs KAVA/USDT vs MIR/USDT vs OSMO/USDT 4 hour chart. Source: TradingView

The price drop for these assets was less extreme than those hosted on the Terra Protocol, but their proxy for Terra did not protect them from contagion.

Related: LUNA meltdown ignites theories and propositions from crypto community

Maker benefits from volatility

Maker (MKR) is the only bright spot to appear in trading on May 11 as crypto traders are now hailing Dai (DAI) as the “best” decentralized stablecoin option on the market.

MKR price is up 124% in trading on May 11, rising from a low of $1,025 to an intraday high of $2,299 before settling back down to $1,278.

MKR/USDT 4 hour chart. Source: TradingView

As the market digests the current correction and news of fund and protocol collapses emerges, it will be interesting to see how other stablecoin protocols like Frax Share (FXS), USDD and mStable (MTA) perform and whether crypto traders shy away from them will or will not these projects for more centralized options.

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