![]() ![]() ![]() Read more: Bitcoin’s Most-Watched Whale Is the King of the ‘Lunatics’ Yet crashing values of both Luna and Bitcoin made maintaining that $1 peg harder and harder. The Luna Foundation Guard, which the project set up to help UST maintain a $1 value, had been on a Bitcoin-buying binge in hopes that holdings of the oldest cryptocurrency could be used in tandem with the Luna token to safeguard the stablecoin’s value. Yet skepticism is rampant that Terra will be able to line up enough financing to save its stablecoin from a death spiral. Terraform Labs, which created the Terra blockchain where Luna and UST were born, is backed by some of the deepest pockets in the industry, including Coinbase Ventures, Galaxy Digital and a host of others. “There’s catching falling knives and then there’s standing outside when it’s raining chainsaws,” Gokhman said. ![]() To Max Gokhman, chief investment officer for AlphaTrAI, selling something that’s crashed so hard at a 50% discount is like a bad joke. The UST stablecoin that’s always meant to be worth $1 traded for less than 30 cents on Wednesday before rebounding to about 50 cents. Luna traded for more than $116 in early April, but a crisis of confidence in the project has caused its value to crash to as low as 84 cents on Wednesday, according to. That spot price is a swiftly moving target, however. The LFG didn’t immediately respond to requests for comment. Investors would be able to buy the Luna cryptocurrency - a coin with fluctuating value that’s used on the other side of arbitrage trades meant to keep UST pegged at $1 - at a 50% discount to the spot price. In the latest example of the crypto world imitating traditional finance, backers of the TerraUSD algorithmic stablecoin (known as UST) are trying to raise about $1.5 billion to shore up the token after it crashed from its dollar peg, according to the founder of a firm that was approached about the deal from the Luna Foundation Guard, a consortium set up to help UST maintain a $1 value. The last-ditch effort to save an insolvent company is so fraught with risk that modern Wall Street firms tend to avoid getting involved, though it’s been seen more commonly in recent years in the sketchy corners of the penny stock market. Now, after the values of both the Luna and TerraUSD coins have collapsed in dramatic fashion, something that in broad strokes resembles an old Wall Street tactic is being revived in hopes of saving the project behind them - death-spiral financing - as well as another money-raising tool favored by strapped companies, a PIPE, where stock is sold to institutions at below-market prices.Īs the phrase implies, death-spiral financing is when desperate companies raise capital by issuing a type of convertible bond that can lead to a flood of shares in the market, potentially dooming the stock price. Further analysis suggests that previous studies, which appeared to detect plans in the throes of a death spiral, may instead have been reflecting an inexorable movement away from a non-preferred product, one that would have been inefficient for nearly all workers even in the absence of adverse selection.(Bloomberg) - From borrowing and lending platforms to synthentic equities to simply trying to build a stable proxy for the US dollar, cryptocurrency projects have long attempted to reimagine traditional financial vehicles for the age of the blockchain. This stands in stark contrast to previous studies, which have tended to estimate large impacts attributed to selection when employers move to a fixed-dollar policy from one with some risk adjustment. Our results show that implementing a significant risk adjustment had no discernable effect on adverse selection against the most generous indemnity insurance policy. This paper uses longitudinal information from a natural experiment in the management of health benefits for a large employer to explore the impact of moving from a fixed-dollar contribution policy to a partially risk-adjusted employer contribution policy. If employees know premiums do not fully reflect the risk differences among workers, such pricing can give rise to a so-called “death spiral” due to adverse selection. Depending on the structure of the employee share of premiums across different health insurance plans, the incentives to choose one plan over another are altered. Employers must determine the types of health care plans to offer and also set employee premiums for each plan provided.
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