terrausd

A Community Bank Primer On The Terrausd Collapse

In July 2021, the company raised $150 million from investors including Arrington XRP Capital, Pantera Capital, Galaxy Digital and BlockTower Capital. The funding went to Terra’s Ecosystem Fund, which sponsors projects on the Terra blockchain. Prior to that, the company had raised $25 million in January of the same year from a similar pool of investors. The blockchain on which the stablecoin operates may fail, which would likely terminate any mechanisms to recover collateral. Capital moving out of algo stables could be seen as positive for other types of crypto project – elsewhere in the market new altcoin presales are still attracting buyers. The USTC, LUNA and LUNC price are in the red today amid breaking news that a House stablecoin bill could see coins like https://www.cnbc.com/money-in-motion/ banned for two years. As we painfully learned from the UST demise, a key component to a decentralized stablecoin is confidence.

terrausd

Earlier this month, those concerns manifested with the collapse of , once the third-largest stablecoin. Before the value plunged, the total market value of all TerraUSD currency was a little over $18.5 billion. As of this writing, the total market capitalization of TerraUSD was just over $4.5 billion, indicating a market decline of approximately $14 billion.

A Community Bank Primer On The Terrausd Collapse

CryptoSlate has no affiliation or relationship with the coins, projects or people mentioned on this page. LFG’s intervention “will add to the selling pressure,” said Derek Lim, head of crypto insights at the Bybit exchange. “BTC will likely go lower before it bounces back when short-sellers take profit.” “Men will literally attack a stablecoin unsuccessfully instead of going to therapy,” Forex Do Kwon, the South Korean crypto entrepreneur who co-founded Terraform Labs, said in a since-deleted tweet. Hundreds of millions of UST was sold on Anchor, Terra’s flagship lending platform, as well as Curve and Binance, resulting in accusations of a “coordinated attack” on the stablecoin. Join a diverse, rapidly growing Web3 ecosystem with projects across DeFi, Gaming, and NFTs.

  • Blockchains can contain so-called smart contracts—code that operates automatically in specified circumstances.
  • These stablecoins use smart contracts to custody other crypto assets such as ether ; the smart contracts take the place of a central stablecoin issuer.
  • Because it’s only backed by the community that uses the currency and computer algorithms designed to keep the market demand for the currency balanced at one dollar, there’s no guarantee that the currency can maintain its peg.
  • As of this writing, the total market capitalization of TerraUSD was just over $4.5 billion, indicating a market decline of approximately $14 billion.

In the crypto equivalent of a bank run, that led more UST holders to try to get their money out. But since one of the main ways to exit from UST was through Luna, which was already falling in value due to investors’ loss of confidence as well as an overall down market, that only worsened the situation. The UST-Luna exchange mechanism meant that the massive UST withdrawals led to a vast expansion in the supply of Luna, driving down its value even further. Non-custodial collateralized stablecoins use other crypto assets as collateral rather than the more traditional DotBig ust crypto trading assets that back custodial stablecoins. These stablecoins use smart contracts to custody other crypto assets such as ether ; the smart contracts take the place of a central stablecoin issuer. Significant examples of fiat currency stablecoins include Tether tokens , USD Coin and Binance USD , which are currently the top three stablecoins by market capitalization and represent the vast majority of total stablecoin volume. These stablecoins offer the promise of stability and reliability, provided that the stablecoin issuer is trustworthy and transparent.

What Did Terra Do?

Rather than depositing $1 with a centralized party to receive 1 unit of a custodial stablecoin from the stablecoin issuer, the user can, for example, deposit $2 worth of ETH in the smart contract and be automatically issued 1 unit of stablecoin. If the price of ETH falls below a certain liquidation threshold, the smart contracts are programmed to automatically liquidate the ETH that is custodied to ensure there is always sufficient collateral to cover the liability. The most prominent example of this category is DAI, which is issued by the Ethereum-based MakerDAO protocol. If you’ll recall, Forex‘s value collapsed in May, causing massive losses for investors who trusted its classification as a stablecoin that’s supposed to maintain its value of $1 per coin. Unlike other stablecoins backed by real-world assets, though, TerraUSD is an “algorithmic” stablecoin that’s not backed by fiat currency. Instead, it’s backed by a cryptocurrency called Luna and has a mechanism in place to restore its value to $1 if it ever falls.

terrausd

“I worked about 20 years doing an 80 hour per week job, which led to a lot of sacrifices, responsibility and stress,” he said. Investors whose lives were ruined by the collapse of the https://www.apzomedia.com/investing-in-terra-ust-powered-by-luna/ stablecoin have started speaking about their experiences. In a matter of hours, UST experienced a precipitous decline in its value as others rushed to remove their assets from Curve—plunging from $1 to $0.76. The total dollar value of all transactions for this asset over the past 24 hours. The percentage of Binance customers who increased or decreased their net position in BTC over the past 24 hours through trading. The percent change in trading volume for this asset compared to 1 hour ago. Lumen is the digital currency of the Stellar Lumens network and is used, among other things, for cross-border transactions.

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