The two main tokens of the fighting crypto project Terra, on Wednesday, went into free fall.
TerraUSD, or UST, fell to 26 cents. The so-called stablecoin is designed to maintain a 1 to 1 peg to the US dollar. According to Coin Metrics, it last traded about 46 cents.
Sister token luna at one point dropped to less than 90 cents before recovering slightly to $ 2.14. The coin has lost about 96% of its value in the last seven days and now has a lower market value than its stablecoin counterpart.
Tokens of blue bitcoin chips and ether observed rampant fluctuations throughout the day as traders tracked UST declines, as well as hotter-than-expected April inflation data. The last time bitcoin rose 1% to $ 31,377, it had previously fallen below $ 30,000. Ether fell 1% to $ 2,309.
Stablecoins are similar to bank accounts for the crypto-economy, offering a reliable accumulation of value to avoid such cryptocurrency volatility as bitcoin, which has become known – at least in theory.
UST is what is known as an “algorithmic” stablecoin. It uses a sophisticated token minting and burning system to regulate supply and stabilize prices. The value of the UST has collapsed under the pressure of cryptocurrency sales recently, leading to further panic in the market.
Do Kwon, the creator of the coin, made a last attempt to return the UST to peg to $ 1, increasing the rate of minting a new moon a day. The company, in fact, allows you to eat supplies of its stablecoin, and he hopes the move will raise the price.
“I understand that the last 72 hours have been extremely difficult for all of you – know that I am determined to work with each of you to overcome this crisis, and we will build a path out of it,” Kwon wrote on Twitter on Wednesday.
Investors were counting on new capital to intensify the project. UST supporters are reportedly seeking to raise more than $ 1 billion in funding to support stablecoin.
Vijay Ayyar, head of Luno’s international cryptocurrency division, said Kwon’s announcement was not credible.
“They are running the system into the drain in the hope that it will start to tie up again if the“ extra ”UST stock is depleted,” Ayar said.
Kwon raised billions of dollars in bitcoin through his Luna Foundation Guard to support the UST during the crisis. Now they are afraid that the Luna Foundation Guard will throw these bitcoins on the market, which will lead to even more sales.
On Wednesday, bitcoin briefly fell below $ 30,000, the second time in a week it fell below that level. The world’s largest cryptocurrency fell more than 50% after its all-time high in November as investors flee risky assets amid fears about rising inflation and slowing economic growth.
Algorithmic stemcoins are a relatively new phenomenon. But UST has become a major player in the crypto-economy with a turnover of 16 billion tokens.
David Moreno Dorokas, an analyst at CryptoCompare, said the situation underscores the “volatility” of algorithmic stablecoins such as UST.
“UST has become an integral and controversial part of the crypto-ecosystem,” he said.