• About
  • Advertise
  • Careers
  • Write for us
  • Contact
  • Terms of service
Sunday, May 29, 2022
The Millennial Source
TMS
Home WORLD

What you need to know about Terra’s UST crash 

byJake Shropshire
May 12, 2022
in WORLD
stablecoin

FILE PHOTO: A bank of cryptocurrency miners operates at the Scrubgrass Plant in Kennerdale, Pennsylvania, U.S., March 8, 2022. REUTERS/Alan Freed

Share on FacebookShare on TwitterShare on Linkedin

Can you really brand a currency as “stable” if it can still drop 80% to hit a market low within two days? Well, apparently, you can. That’s exactly what happened with TerraUSD (UST), a stablecoin offshoot of a different cryptocurrency called Terra (LUNA), which, by the way, also lost 98% of its value in the past two days. 

The point of a stablecoin is that it’s pegged to a specific currency, in this case, the US dollar. But because it does this through some fancy algorithms, trader incentives and a little bit of luck, it can always collapse, causing investors to jump ship and make things even worse.

The whole purpose of UST is that you can stay within the ecosystem and not have to worry about coin values wildly fluctuating. Only a month ago, things were looking great. But now, not so much. Now Terra’s main backer is trying to raise US$1.5 billion to replenish the token’s liquidity after it, pretty suddenly and to many people’s surprise, virtually disappeared from buying books. It could take days, if not weeks, for UST to re-peg to the value of USD.

Key comments:

“Once liquidity evaporated, this perpetuated the collapse of the stablecoin,” said Clara Medalie, research director at Kaiko, in an email. For the currency to go back up to US$1 per coin, users would have to buy every last coin, which isn’t exactly likely. “This morning, there is virtually nothing left.”

“Many people were caught off guard,” said Nikita Fadeev, a partner and head of crypto fund Fasanara Digital. “It will get worse before it will get better – way too much UST is looking to exit, and the death spiral is very reflexive at these levels. It’s a long road ahead.”

Like TMS? Subscribe to our free daily newsletter

. . .

Related

Tags: CryptocurrenciesWorld
ShareTweetShare

Latest Posts

China proposal

China proposes economic and security agreement to 10 Pacific nations

May 27, 2022

Singapore Prime Minister Lee Hsien Loong warns against excluding China from regional summits

May 27, 2022
Cathay Pacific

Cathay Pacific seeks to rehire ex-staff as part of airline’s “anticipated recovery”

May 27, 2022

HSBC is said to be considering IPO of Indonesian business

May 27, 2022

Russia edges closer to a historic debt default

May 26, 2022

Hong Kong customs seizes illegal smoking products worth millions after e-cigarette ban

May 26, 2022

Texas shooting: 21 people confirmed dead; Biden says he’s “sick and tired” of US gun violence

May 26, 2022

Several key takeaways from Biden’s trip to Asia

May 25, 2022

What you need to know about the changing egg freezing laws in Singapore

May 25, 2022

SUBSCRIBE TO THE TMS NEWSLETTER

By providing your email, you agree to our Privacy Policy

The Millennial Source Ltd. 2021

No Result
View All Result
  • Your daily briefing
  • About us
  • Explore
    • Startups
    • Climate change
    • Tech giants
    • Crypto
    • The future of work
    • Banking giants
    • Economy
  • Lifestyle
  • TMS archives
  • Write for us
  • Contact
  • Privacy Policy & Terms

© 2022 The Millennial Source Ltd.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist

We are using cookies to give you the best experience on our website.

You can find out more about which cookies we are using or switch them off in settings.

string(24) "jsonld single post debug"
The Millennial Source
Powered by  GDPR Cookie Compliance
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.

Strictly Necessary Cookies

Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.

If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.