Terra’s LUNA fell as low as $23.50 early today on the Binance platform before reclaiming some ground.
Around the time of writing, the beleaguered cryptocurrency was trading at $28.
Earlier today, the flagship UST stablecoin hit an all-time low of $0.68 before recovering to $0.80.
The stablecoin briefly lost its peg on Sunday, according to U.Today. Things grew even uglier for UST after a brief comeback, as Terra’s largest stablecoin entirely lost its peg.
Not Decentralized
UST is an algorithmic decentralized stablecoin, which means its dollar peg is not maintained by centralized entities like Tether. To mint UST, the technique necessitates the use of LUNA (and vice versa).
Despite the fact that Luna Foundation Guard has been busy deploying its large Bitcoin holdings in an attempt to restore UST’s stability, the stablecoin is still down 16.49% at press time. LFG’s Bitcoin reserves were insufficient to assist UST in restoring its dollar peg.
Hasu, a cryptocurrency researcher, believes that UST isn’t truly decentralized. That’s, because its collateral backing is for undertaking discretionary open market activities by a single party.
Terra’s Bad Choices
Terra aggravated the market crisis by utilizing its Bitcoin reserves to protect its dollar peg. Earlier today, the world’s largest cryptocurrency fell to a new yearly low of $29,731.
The writing was on the wall for some. A stablecoin backed by volatile assets, according to FTX CEO Sam Bankman-Fried, would not survive a major market crisis.
The UST stablecoin is not the first to fail. IRON, Iron Finance’s algorithmic stablecoin, plummeted to zero in June.
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