UST falls to $0.35, Terra futures record $106M in liquidations.

UST falls to $0.35, Terra futures record $106M in liquidations.

About 58% of LUNA traders were betting on higher prices even as tokens fell yesterday.

Futures traders lost $106 million on Terra's LUNA in the last 24 hours as prices fell below $7.

The data show that about 58% of traders were betting on higher LUNA prices despite yesterday's price decline. This development resulted in over $63 million worth of liquidations, an above-average figure and one of the largest in the history of LUNA futures.

However, $387 million in open interest - or the number of unsettled futures contracts - remains, suggesting that more liquidations or volatile price action could be ahead as traders take profits or liquidate.

Algorithmic stablecoins such as UST are backed by a basket of assets such as LUNA and Bitcoin (BTC), with no reliance on a central third party to hold those assets. This week, however, UST lost its bond, falling as low as $0.66 on Monday evening before recovering to $0.90 on Tuesday.

On Wednesday, the recovery was not so good. UST fell below $0.35 this morning as traders' sentiment towards the stablecoin weakened. This happened even though the Luna Foundation Guard (LFG), a non-profit organization formed earlier this year to maintain a reserve for LUNA, liquidated its bitcoin holdings to try to save UST's peg.

LUNA's decline was one of the sharpest for a major cryptocurrency in recent memory. Prices fell 85% in the last 24 hours and 32% in the last hour alone as traders priced in contagion risks for LUNA tokens as TerraUSD (UST), the platform stablecoin pegged to the U.S. dollar, lost its peg earlier this week.

Part of LUNA's decline is due to parent company Terra apparently issuing more tokens to sell on the open market to raise money to support UST. By design, $1 worth of LUNA can be exchanged for exactly 1 UST or vice versa. The additional supply may have contributed to LUNA's huge price drop in the last 24 hours.