TerraUSD lost its value over the past weekend and fell to around $0.65 on Monday. It was the second time in three days that the currency had slumped below the $1. Since then, it has been trying to recover and is trading at $0.9 today, 9% lower than yesterday.
UST’s Price Drop
Due to the sudden decline in the price of the stablecoin, investors are in panic mode.
Treasury Secretary Yellen highlighted the TerraUSD (UST) debacle today, saying:
“A stablecoin known as TerraUSD experienced a run and declined in value. I think that this simply illustrates that this is a rapidly growing product and there are rapidly growing risks.”
This past weekend, UST’s price dropped below $1 for the first time since Terra announced its bid to build a bitcoin and avalanche reserve. The stablecoin lost its value again this Monday, falling below the dollar and hitting a low of $0.62 on Binance. It then recovered slightly on Tuesday to $0.87, but it remains below its original price of $1.
Following the crash, Do Kwon, the CEO of Terraform Labs, assured the community that it would resolve the company’s issues. However, UST continued to decline and fell below the dollar along with the other stablecoins.
The firm behind it, TerraUSD, temporarily suspended its withdrawals due to the high volume of transactions. It noted that it would resume its withdrawals once it had determined that the network was stable. On the other hand, the value of LUNA, which is Terra’s other token, briefly hit $23.
LFG Forced to Sell BTC
Earlier today, The Luna Foundation Guard announced that it would provide over-the-counter trading firms with $750 million in Bitcoin and UST to help protect the stablecoin’s value. Despite the foundation’s assurances, the decision to sell the massive amount of Bitcoin has strained the industry’s already fragile financial situation as it is trading close to the $30K mark.
On May 5, the LFG revealed that it had acquired 37,863 additional coins, bringing its total holdings to 167,081 BTC. On May 5, the LFG revealed that it had acquired 37,863 additional coins, bringing its total holdings to 167,081 BTC.
Do Kwon, Terra’s founder, was unfazed by the market’s sudden volatility saying in a Tweet, “Deploying more capital – Steady lads.” After the tweet, the firm moved 42,500 BTC to different destinations.
Derek Lee, a senior analyst at Bybit, warned that the foundation’s decision could lead to a sell-off in the market. Han Kao of Sanctor Capital noted that the move could negatively affect Bitcoin’s price.
LUNA Tumbles Over 50%
As UST “de-pegged” over the weekend, LUNA dropped 52% to $29, according to data from CoinMarketCap. Currently, LUNA is trading at $30.09, a 43.81% drop from yesterday.
UST uses a dual token mechanism, allowing users to earn money from the sale of Terra’s native token, LUNA. When the stablecoin trades below peg, investors can burn it to eliminate the remaining $1 worth of tokens. It lowers the supply and brings the stablecoin closer to its goal of $1. When the stablecoin trades above the peg, investors can earn money by burning it to create new UST. This method increases the supply and brings the stablecoin closer to its goal of $1. Hence, its price was affected by the move.
The global crypto market cap has decreased by 1% to $1.43 trillion in the last 24 hours. Over the last week, every top 10 cryptocurrency price has also dropped in price. The volume of transactions in the global cryptocurrency market has also increased by 63%.