TerraUST Disaster Spells ‘Doom’ For Other Algorithmic Stablecoins

Vinod Dsouza
UST Stablecoins
Source: iQoncept/Adobe Stock/TechRepublic.com

The Terra UST crash sent shockwaves around the crypto world indicating that not everything ‘stable’ is indeed stable. TerraUST got depegged 1:1 from the USD crashing straight to $0 in a free fall slump in 3-trading days. The crash shed doubts on the happenings of Terraform Labs team and its founder Do Kwon of wrongdoings. The crash has led to fears that other stablecoins might face a similar fate and wipe all investments in a jiffy.

Tether co-founder Reeve Collins believes that the TerraUST disaster spells doom for other algorithmic stablecoins. He revealed to CNBC that last month’s crash could be a catalyst that triggers the downfall of other algorithmic stablecoins. He also stated that TerraUST’s fall to $0 “was not a surprise.”

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“It’s an algorithmic-backed, stablecoin. So it’s just a bunch of smart people trying to figure out how to peg something to the dollar,” he said to CNBC.

In his opinion, Collins revealed that other algorithmic stablecoins might soon follow UST and ultimately come to an end. In other words, TerraUST’s fall has opened up a Pandora’s Box of fears suggesting investors stay cautious on UST.

UST Stablecoin Supplies Drop $30 Billion

Investments in stablecoins saw their steepest fall as they dropped $30 billion in the last 30-trading days. The development indicates that trust in UST is eroding and investors are playing it safe to protect their finances. Crypto data aggregation and analytics firm CryptoRank published the findings today, saying it’s the largest decline in the history of the crypto market.

In addition, the market is trading on the backfoot making investors hold on to their wallets before going all-in. A bull run is nowhere on the horizon and the markets are expected to dip further due to weak global economic cues. Most importantly, investors are already deep underwater and forced to hold on to their holdings for a longer period in return for decent gains or break even.

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At press time, LUNA 2.0 was trading at $6.95 and is up 8.9% in the 24-hours day trade.