Losing 70%..a software error that loses “TerraUSD” stability against the dollar

The accelerating storm of crash that hit the digital markets has widely affected many cryptocurrencies, from Bitcoin to the most stable – formerly – TerraUSD.

The TerraUSD cryptocurrency fell to 30 cents, which is supposed to be pegged to the US dollar at a 1:1 ratio, as traders await the recovery plan promised by its founder.

TerraUSD is known with the trading symbol ‘UST’, and it is one of the “stable” currencies in the cryptocurrency trading markets that is supposed to mimic the value of the dollar like its USDT, USDC and BUSD counterparts, but is linked to a cryptocurrency called Luna that is traded on a traditional speculative system and its price is determined by supply and demand.

The Luna cryptocurrency was one of the top ten coins by market cap, overtaking Shiba Inu and Dogecoin, but failed to maintain its value this week, and on Tuesday morning TerraUSD dropped below $0.70.

UST recovered some of its value later in the day but fell back down to $0.3062 on Wednesday and was recently trading at just over 40 cents according to Coingecko.

Terraform Labs co-founder Do Kwon said in a tweet on Tuesday: “We are close to announcing a recovery plan. Wait a bit.”

General decline in cryptocurrency
The Amber Group’s director of sales, Justin Danthan, said the use of bitcoin as a reserve has created a vicious cycle for TerraUSD, with sell-offs in the two currencies driving the other down.

Danthan explained that Bitcoin “is currently deteriorating due to the massive selling off of traders to avoid massive losses, which has led to more market suffering and more panic over TerraUSD, which is weighing on the Luna cryptocurrency, and requires the institution to use more reserves to hedge and contain Situation”.

Stablecoins are mostly used to facilitate trading in other digital assets. They are backed by assets that could lose value or become non-tradable in times of market stress, while the rules and disclosures surrounding these assets and investor redemption rights are ambiguous.

Leave a Comment