Cryptocurrency hedge fund Arca is confident that stablecoin Terra, UST, will eventually return to its dollar peg. In a note to investors during this week's investment and risk committee meeting, the company said the stablecoin will regain stability and represent a buying opportunity.
Arca, which has $ 500 million in assets under management, has a number of cryptocurrency-denominated funds for institutional investors. The CEO of the company does not share the FUD (fear, uncertainty and doubt) and the negative news surrounding the project.
Land purchase opportunity
CEO Rayne Steinberg told the company's limited partners that these opportunities are welcome when others are fearful.
"After this analysis, we have assumed, and continue to believe, that UST will eventually keep its peg and that several interesting opportunities have become available."
He explained that the company could buy USTs at a significant discount to face value in its Digital Yield Fund (DYF) and then deposit them on the FTX exchange, which offers 100% returns "given the imbalance between buyers and sellers during the peak. Of fear".
He stated that similar situations have occurred in the past, citing the SushiSwap decentralized exchange token, SUSHI, and the Bitfinex LEO exchange token.
“We have significant experience in crisis situations from 2008/2009 up to SUSHI and LEO (Bitfinex) in recent years”.
UST is still trading well below its peg following the initial plunge on Tuesday 10 May. The stablecoin is currently trading at $ 0,72, according to CoinGecko. It hit a low of just below $ 11 on May 0,30, but quickly bounced back to current levels.
Arbitrage opportunities exist for those who are confident enough to take the risk of buying UST with another stablecoin such as Tether or USDC and then selling it if or when the peg recovers.
On May 11, Terraform Labs CEO Kwon Do reached out to the cryptocurrency community with details of a recovery plan. “The only way forward will be to absorb the stablecoin supply that wants to go out before $ UST can start the repeg. There is no way around it, ”he said.
The Luna Guard Foundation has also reached out to investors for a $ XNUMX billion investment to support the besieged stablecoin.
Collapse of the price of LUNA
The underlying token guaranteeing the FSO has collapsed to practically zero. At the time of writing, LUNA was trading at just $ 0,70, having lost 99% of its value in less than a week.
LUNA hit an all-time high of just under $ 120 on April 5, when enthusiasm for the algorithmic stablecoin ecosystem was at its peak.
Today, even the broader cryptocurrency market is taking a hit, with a further 10% drop in total market capitalization, which currently stands at $ 1,32 trillion.