UST

Terra's stablecoin has decoupled from its peg. What does this mean, and why does it matter? As crypto crashes, Terra USD wobbles, shaking the foundations of ...

Over the weekend, there was a massive surge in the Terra USD (UST) supply, which caused the price of the token to fall as low as under 99 cents. Do Kwon, the founder of UST developer Terraform Labs, reportedly wrote in a since-deleted tweet, “Men will literally attack a stablecoin unsuccessfully instead of going to therapy.” That’s because it’s a stablecoin: a cryptocurrency token that’s pegged to the value of a more stable asset like the U.S. dollar, in order to eliminate some of the risks for which crypto is famed. Rather than keeping reserves, these coins rely on algorithms that maintain a stablecoin’s price similarly to a central bank, which manipulates a fiat currency’s price by controlling the supply of cash. When a stablecoin’s price rises too high, its algorithms mint more tokens to lower its price—or the reverse if the price falls too low. For example, the leading stablecoin, USD Coin, is backed by the U.S. dollar.

Terra's UST stablecoin has continued to slip below its dollar peg—and throwing Bitcoin at the problem has yet to work.

But the solution hasn't made a difference yet. As of May 3, LFG had stockpiled nearly $4 billion worth of Bitcoin, Avalanche, UST, and LUNA for its reserves that it could fall back on in case the algorithm stopped working. On Coinbase, the listed price got as low as $0.65. Order is theoretically restored as the free market does all the work. As in most markets, it's all but impossible to determine to what degree Terra's troubles were a result of the crypto downswing and to what degree Terra helped cause that downswing. As the stablecoin's price peg slipped to $0.985 this weekend, it voted to lend out $750 million in Bitcoin and $750 million in UST to "proactively defend the stability of the $UST peg & broader Terra economy, especially under volatility and the uncertainty of macro conditions in legacy markets."

The development comes after the Luna Foundation Guard announced that its massive bitcoin reserves will be used to defend UST's dollar peg.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. The project’s floor price has dropped dramatically following the news. Currently, there is no concrete link between the LFG reserves and Terra's on-chain mint and burn mechanism. UST, a so-called algorithmic stablecoin, works with LUNA to maintain a price of $1 using a set of on-chain mint and burn mechanics. The project’s floor price has dropped dramatically following the news. The project’s floor price has dropped dramatically following the news.

According to data from CoinMarketCap, Terra's native cryptocurrency LUNA plunged from $83 on May 6, 2022, to $60.2 at the time of writing.

With such massive volumes of UST being dumped, its supply in the market skyrocketed. Since the UST is pegged against the US Dollar, Terra maintains a collateral reserve in the form of its LUNA tokens. LUNA is the variable counterpart to UST. By modulating supply, LUNA's valuation increases as UST demand increases. In this case, one enormous crypto whale dumped $285 million worth of UST in the open market between 7 and 8 May 2022. At the same time, the market capitalisation of LUNA also shed 22.84 percent, slipping from $27.41 billion to $21.15 billion. According to data from CoinMarketCap, Terra's native cryptocurrency LUNA plunged from $83 on May 6, 2022, to $60.2 at the time of writing.

The spring of 2021 was a bad one for the price of Bitcoin, and 2022 is shaping up the same. Early on Monday, the largest cryptocurrency by market value plunged ...

On Saturday, the Luna Foundation Guard (LFG), a reserve associated with Terra, announced it would issue $1.5 billion in loans denominated in Bitcoin and UST after the stablecoin lost its peg to the U.S. dollar. From May to July 2021, Bitcoin saw a similar tumble, around the news of the Delta variant disrupting the economic recovery. Early on Monday, the largest cryptocurrency by market value plunged 50% from its November all-time high of $69,000, and it’s still dropping in the evening.

TerraUSD is without its dollar peg for the second time in three days, falling to $0.9009 on Monday, with price of Luna also dropping 30% in the last 24 ...

Luna has a floating price, and is meant to be a “shock absorber” for the price of UST. On March 22, he said he had $3 billion in funds that would go towards buying assets to back the stablecoin. The report noted that Luna’s price drop makes its market cap is less than UST’s, which could throw off the way it all works, making it so a Terra bank run could make it so some users can’t redeem UST for Luna.

Terra's stablecoin UST, the poster child for decentralized assets tied to the US dollar, is off its peg by the most ever as its backbone, the LUNA token, ...

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Bitcoin's price is down more than 50% from its November 2021 peak and has fallen over 11% today, nearing the $30000 mark, leaving many investors scrambling ...

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Bitcoin and the wider suffered a severe sell-off on Monday. This article explores the external and internal factors that drove the price drop.

Algorithmic stablecoins, like their more “traditional” counterparts, are supposed to provide calm in the chaos of crypto. Instead, as investors in one such ...

While China has banned cryptocurrency trading, its people remain interested in the ups and downs of the crypto market, not least because many of them have ...

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Terra is not in the most stable position at the moment, since its stablecoin and native token are both at the mercy of the bears.

Working as a journalist and editor in the crypto industry for over a year now has made me better understand the responsibilities that entail this profession. This left the LFG reserve balance at just $2.7 billion when it was at $3.9 billion a week ago. The last 24 hours have been terribly uneventful for Terra ecosystem investors as TerraUSD, known to be the biggest decentralized stablecoin, lost its peg. The lending platform noted the total value locked on it declined. With a keen interest in Decentralized Finance and the political impact of this industry, I strive to absorb as much knowledge as I can and share it with others. As I continue to learn and grow, my experience as a market analyst, news writer, and interviewer has enabled me to better understand cryptocurrencies, the world of NFTs and Metaverse, and everything that comes with web3.

LUNA token was down 52% on the day, while UST recovered slightly to $0.90 at the time of writing.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Updates token prices throughout. The news of the fundraise coincides with the launch of Casa API.

Investors in bitcoin are in panic mode as the controversial terraUSD stablecoin slips further from its intended $1 peg.

In a follow-up tweet, the organization said it had withdrawn 37,000 bitcoins — worth over $1 billion at current prices — to lend out. In simple terms, the Terra protocol destroys and creates new units of UST and luna to adjust supply. As of 7:00 a.m. ET, bitcoin was trading at $31,324, down around 5% in the last 24 hours. The theory was that UST could eventually be redeemed for bitcoin instead of luna, but this is untested and hasn't yet been put into practice. TerraUSD, or UST, sank below 70 cents for the first time late Monday, as holders continued to flee the token in what some have described as a "bank run." However, unlike with those cryptocurrencies, Terra doesn't have cash and other assets held in a reserve to back its token.

LUNA and UST cryptocurrencies are in a freefall amidst a crypto market meltdown. What's happening?

That's just a simplified example, but someone has been selling a lot of UST and shorting a lot of LUNA. The LFG's coffers are deep, and there may be other large investors willing to jump in and help maintain the UST's price. A stablecoin that's backed dollar for dollar, with dollars held in actual cash in a bank somewhere, is a lot less likely to lose peg against the dollar. Should LFG be forced to sell all of its Bitcoin, that would probably be bad for Bitcoin's price. It has a "sister" cryptocurrency called LUNA, to which it is inextricably linked, as you must burn (crypto lingo for destroying) LUNA to create UST and vice versa, and you can always (in theory) exchange 1 UST for $1 worth of LUNA. The system is designed to take advantage of supply and demand; should demand for UST drop and its price lose peg to the dollar, arbitrageurs (traders who make money from market inefficiencies) will (in theory) sell LUNA for UST until the balance is restored. Bitcoin's price is itself volatile, and it's not doing well in the current macroeconomic climate, with the Fed switching from quantitative easing to tightening, supply chain wreaking havoc in manufacturing, and the war in Ukraine raging and adding even more jitters to the already shaky markets. The easy way to do this would be to just deploy dollars, but the LFG has been buying massive amounts of Bitcoin, adding it to the treasury that can be used to protect the UST's price. There's another mechanism that protects UST's peg to the dollar. But they do not work well in extreme scenarios, such as market demand for LUNA and/or UST disappearing overnight. The decline was rapid, but that's fairly usual in the world of crypto. In the world of cryptocurrencies, things aren't that bad because entire countries' economies aren't at stake, but they're still bad. OK, but imagine the USD losing purchasing power in a matter of hours or minutes.

Yellen said UST had "experienced a run" at a Senate Banking Committee hearing Tuesday. Photo: Stefani Reynolds/AFP/Getty Images.

But the stablecoin lost its peg over the weekend, dropping as low as $0.60. It's not clear what caused the stablecoin to lose its peg. The algorithmic stablecoin UST, which is on the Terra network, is designed to keep a one-to-one peg with the U.S. dollar.

Yellen Cites UST Breakdown While Calling for Stablecoin Rules · Treasury Secretary points to risk of financial instability · Fed warned this week that stablecoins ...

A 'stable' coin lost its peg over the weekend and pledged $1.5 billion in Bitcoin trying to stabilize. Here's how the algorithmic stablecoin was supposed to ...

As the UST stablecoin dropped, it brought its sister coin down with it. It (theoretically) maintains its dollar peg through an algorithm that encourages traders to take advantage of any price changes in the stablecoin. But he stops short of calling UST stable. The system relies on traders burning or creating tokens for profit to maintain its peg to the U.S. dollar. But after days of triage by LFG, the UST stablecoin still hasn’t regained its peg. Because there is less UST changing digital hands, the price should theoretically go up toward $1 again, maintaining the peg. This process works through UST’s pairing with its sister cryptocurrency, Luna. Every time a UST token is minted, the equivalent of $1 in Luna is burned, and vice versa. The idea behind stablecoins is that investors use them as a “safe” cryptocurrency asset. Lacking reserves puts UST in particular at the will of various assumptions, Clements said, including those that there will be ongoing interest in the use cases of UST and that there will always be enough traders with accurate price information taking advantage of when UST falls below a dollar to keep the stablecoin in check. On Saturday, the UST stablecoin lost its peg to the U.S. dollar and then again on Monday. As of Tuesday afternoon, the stablecoin was still off its dollar peg by about 10 cents. If the price of UST exceeds $1, traders are incentivized to burn Luna in exchange for a dollar in UST, which increases its supply and theoretically will eventually drop the price back to $1. They are tied to the price of a fiat currency like the U.S. dollar, so in theory, one stablecoin pegged to the dollar is always worth at least $1.

Treasury Secretary Janet Yellen pointed to a recent run on the stablecoin TerraUSD as evidence of the potential threat to financial stability posed by...

“A stablecoin known as TerraUSD experienced a run and declined in value,” Yellen said. Stablecoins are a type of cryptocurrency that aim to maintain a stable value relative to government-issued currencies like the U.S. dollar. Terra cofounder Do Kwan explained the move in a series of tweets: Terraform Labs couldn’t be reached for comment, though Kwon said on Twitter Tuesday that he is “close to announcing a recovery plan for UST.” “I think that simply illustrates that this is a rapidly growing product and that there are risks to financial stability and we need a framework that’s appropriate.” Treasury Secretary Janet Yellen pointed to a recent run on the stablecoin TerraUSD as evidence of the potential threat to financial stability posed by unregulated cryptocurrency markets during a Senate Banking Committee hearing Tuesday.

Treasury Secretary Janet Yellen highlights latest news on UST algorithmic stablecoin losing its dollar peg during Senate Banking Committee hearing.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. As inflation peaks, bitcoin traders should be wary of reading too much into data. "We definitely see significant risks here." But she said the dangers from stablecoins have already been detailed by the President’s Working Group on Financial Markets. She later said legislation to address crypto regulation would be "appropriate" this year. As inflation peaks, bitcoin traders should be wary of reading too much into data.