As cryptocurrencies like Bitcoin, Ethereum among others are known for their high volatility, there is another asset class called Stablecoin and it is known for its lower volatility due to its peg to the US dollar. The main reason for building a stablecoin is that it will not fluctuate in price as well as provide crypto benefits.
However, at the moment, the cryptocurrency market is alarmed that Terra’s UST stablecoin is losing its dollar peg. And this has raised the question of the stability of its competitor’s Tether and USD coins.
What impact will UST have on other stablecoins?
The idea behind stablecoin is that if an investor wants to get their USDT, USDC or any stablecoin back, then they would receive exactly $1 for each token the user sells.
Now when we talk about UST, it is a stablecoin algorithm that uses smart contracts to maintain its 1:1 dollar parity. However, as the crypto market has plunged deep with the bearish flow, currently the price of UST has reached an all-time low of $0.33 and lost its parity with the dollar.
Although UST has a different tokenomics, concern has been raised regarding other stablecoins, which is why Tether co-founder Reeve Collins told Decrypt in an email assuring users there is no need to panic. . Furthermore, he says that Tether users should feel safe as Tether will maintain its peg since it is backed by dollars and the strength of the market has no effect on the token.
However, sometimes Tether and USDC have lost their peg to the dollar. As recently as March 16, 2020, Tether USDT had dropped to $0.98 and even USDC lost its peg to $0.97.
In contrast, the CEO of Umee, a layer one interoperability chain built on top of the Cosmos ecosystem, Brent Xu, believes that UST will restore its peg to the dollar soon. But he cites that USDC and USDT are not completely immune to market news.
Meanwhile, Derek Lim, crypto information lead at exchange Bybit, believes that while Terra’s price action poses no threat to USDC or USDT, they are linked via Curve 3pool, the platform that allows investors to trade coins. stable.
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This post As Terra UST Loses Peg to USD, USDT and USDC Stability Concerns!
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