$USDT is now down to $0.95!
At the time of writing, USDT has fallen to $0.95, losing its $1 peg to the US dollar. Due to low demand for stablecoins, crypto dealers traded USDT for US dollars. Terra’s stablecoin UST depegged to as low as $0.3 from its targeted $1 level earlier this week.
UST has dropped off its peg due to a sharp drop in the price of LUNA. LUNA tokens serve as Terra network’s reserve fund, supporting the network’s stablecoin UST. Terra keeps its peg by minting and burning LUNA, to put it another way, the stability of UST is highly dependent on the stability of LUNA.
LUNA is now trading at $0.13, down over 95% in the last 24 hours, according to CoinCu data. UST has also dropped to $0.58 after recovering around the $0.9 level. With a market capitalization of about $491M, LUNA has dropped out of the top ten list of tokens by market capitalization. This is one of the most impressive large-cap token sell-offs we’ve witnessed this year, and it signals many serious trouble and concerns about the collapse of Terra network and its stablecoin system.
Do Kwon, CEO of Terraform Labs, has revealed his plan to help the stablecoin UST recover its dollar peg. He stated in a Twitter thread on Wednesday that the Terra community has had a difficult 72 hours and that he hopes he can help it survive. Because of the way stablecoin mechanics operate, Kwon realized that the amount of capital seeking to leave UST has resulted in a lot of selling of LUNA. This has resulted in a significant price decline for LUNA, which is currently down over 90%.
“Before anything else, the only path forward will be to absorb the stablecoin supply that wants to exit before UST can start to repeg. There is no way around it,” he said on Twitter.
He’s supporting a proposal from the community to boost the quantity of LUNA minted every day. More UST holders would be able to cash out as a result.
“Naturally, this is at a high cost to UST and LUNA holders, but we will continue to explore various options to bring in more exogenous capital to the ecosystem & reduce supply overhang on UST,” he said.
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