Terra crisis caused UST-linked DeFi protocols to drop by more than 80%

As the crisis spread, more than 80% of Terra- related projects were lost. Meanwhile, Maker (DAI) got a boost as traders looked for other decentralized stablecoins.

The knock-on effects of the May 11 collapse of Terra ( LUNA ) and its stablecoin TerraUSD (UST) spread widely across the cryptocurrency market, with projects with any connection to the DeFi ecosystem taking a price hit.

The forced sell-off of Bitcoin reserves backing part of UST also caused BTC to drop to $29,000, and analysts worried that DeFi platforms with liquidity pools mainly composed of UST and LUNA would collapse.

LUNA, ANC, ASTRO, and MARS (USDT-denominated) 4-hour chart

Source: TradingView

The projects with the worst prospects are those based on the Terra protocol, including Anchor Protocol (ANC), Astroport (ASTRO), and Mars Protocol (Mars).

As the chart above shows, token prices for Anchor Protocol (ANC), Astroport (ASTRO), and Mars Protocol (Mars) have plummeted by more than 80% since LUNA prices first started correcting on May 4.

These protocols are all DeFi-focused, meaning they are deeply integrated with UST, the primary stablecoin for their liquidity pairs, and LUNA, the primary source of value locked in their smart contracts.

As long as UST continues to break away from the $1 peg, the protocols are unlikely to bounce back and recover from the dip, while LUNA is trading down 98% from 7 days ago.

Assets in the Cosmos ecosystem were also hit hard by the UST crash. ATOM and other tokens that use the Inter-Blockchain Communication Protocol (IBC), such as Mirror Protocol (MIR), Osmosis (OSMO), and Kava, saw sharp pullbacks due to their integration with Terra.

ATOM/USDT vs. KAVA/USDT vs. MIR/USDT vs. OSMO/USDT 4-Hour Chart

Source: TradingView

The price drops for these assets were less severe than those hosted on the Terra protocol, but their integration with Terra did not protect them from the impact.

Maker ( MKR ) was a bright spot in trading on May 11, with cryptocurrency traders now embracing Dai (DAI) as the “best” decentralized stablecoin option on the market.

On May 11, the MKR price surged 124%, from a low of $1,025 to an intraday high of $2,299 before falling back to $1,278.

MKR/USDT 4-hour chart Source: TradingView

As the market digests the current correction and news of a protocol crash emerges, watch how other stablecoin protocols like Frax Share (FXS), USDD, and mStable (MTA) perform, and whether crypto traders will trade for more centralized options It will be fun to avoid these items.

TEXT: JORDAN FINNESETH‍

Compile: Zion