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. (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.
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