70% drop in value. The sale of cryptocurrencies caused a catastrophe at the well-known stablecoin

TASR materials were used in the article.

Stablecoins are known in the world of cryptocurrencies as coins whose value is in some way tied to government currency or assets. Theoretically, they should serve as a secure store of value that is not as volatile as bitcoin and other cryptocurrencies.

The largest of them, USDT, USD Coin or DAI, work on a different principle, but they manage to keep the value around one dollar stable for a relatively long time.

However, a different situation occurred today with the largest algorithmic stablecoin TerraUSD (UST), which after a steep fall ended at the level of 0.30 USD, which represents a drop of 70%. At the time of writing, its price is around $ 0.6. Today, the cryptocurrency is in free fall with it Terraie his parent project, which lost more than 90% of its value and from more than 60 USD to the current 2 USD.

UST is the third largest stablecoinom and the largest so-called algorithmic stablecoinom. It has been designed so that its value follows the value of the US dollar, through advanced algorithms and smart contracts that adjust the supply of issued tokens as needed without the need for reserves, similar to what central banks do.

In UST, the system also relied on traders who burned or created tokens at low profits, which kept UST’s price stable. The token was theoretically supposed to sell for $ 1, but its price fell under the pressure of the sale of the cryptocurrency market, which further increased the panic in the market.

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Through the Luna Foundation Guard, Kwon, who created the UST, has amassed billions of dollars worth of bitcoins to support the UST in times of crisis. Now the market is worried that the Luna Foundation Guard will start selling these bitcoins, which will cause an even bigger sale.

Bitcoin briefly fell below $ 30,000 on Tuesday and hit its lowest level since July 2021. After a slight rebound, it continues to fall today, selling at around $ 31,000 at the time of writing.

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Let us recall that the largest stablecoin Tether (USDT), secured by a reserve in Fiat, ie the traditional state-covered currency, also experienced a short, albeit less significant, decline today. He according to Coinmarketcap in the afternoon, it fell to about $ 0.9935, most recently during a short-term bitcoin slump in the first half of 2021.