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Once the third largest stablecoin, TerraUSD (UST) has shaken everything stable coin market after it crashed on May 9. Instead of finally finding a solution to the algorithmic stables as thousands of people thought, it went down to zero almost overnight.

UST failed due to a sudden and massive sell-off when it decoupled, causing an excessive amount of Terra (LUNA) to be minted. Despite its rapidly expanding offering, MOON he was unable to pin UST back to $1 as its value plummeted.

UST’s market cap outperformed Binance USD (BUSD) in April, meaning it trailed only Tether (USDT) and USD Coin (USDC). However, the crash came so quickly that it was too late for many investors to even cash in at a loss.

The event has created the biggest crisis of confidence in DeFi. Stablecoins are no longer stable.

But crises bring their own opportunity. How has the stablecoin market changed after the UST?

People are nervous about Tether and are heating up with USD Coin

USDT and USDC account for nearly 80% of the total stablecoin market.

For every USDT issued, the Tether bank account is funded with USD funds at a 1:1 ratio. USDC is similar to USDT and is issued by Circle.

USDT is by far the more controversial project of the two. In October 2021, He garnered significant press coverage for his alleged lack of transparency and repeated sanctions by US regulators for lying to the public.

When UST crashed, people immediately thought of USDT, and its market cap dropped by more than $10 billion to $72.5 billion in the course of half a month.

Curve’s 3pool, its largest pool (made up of DAI, USDC, and USDT) reflects market sentiment around these top stablecoins.

USDT had previously been held in the 20-30% of the group. However, when Terra Luna crashed, users started throwing their USDT into the pool and swapped for USDC and DAI. This frantic sell-off led USDT to hit a high of 83%.

Footprint analysis – Curve 3pool on Ethereum

Before the crash, USDT price tended to hover above $1, but the event took it to a near three-month low of $0.996. Paolo Ardoino, CTO of Tether, announced on Twitter that he had redeemed $7 billion to help him get his dollar anchor back, and was confident that he could continue to do so if the market wanted.

Footprint Analysis – USDT Price Trend

The move has restored some confidence and the 3pool USDT percentage fell to 61% on June 5th.

USDT market capitalization fell $10 billion, but its share of the total stablecoin market has not diminished.

This leads to the question of where UST’s market share has shifted.

According to footprint analysisUSDC has been the biggest beneficiary, with its market capitalization increasing from $48.3 billion to $54.1 billion and its market share from 27% to 34%.

Footprint Analysis: Stablecoin Market Cap

DAI finds its footing while Magic Internet Money stumbles

Overcollateralized stablecoins, led by Dai (DAI), Magic Internet Money (MIM) and Liquity (LUSD) are minted by depositing non-stablecoins that exceed the 1:1 ratio in the protocol as collateral.me

These overcollateralized coins were affected by the UST drop, but indirectly. The respective market capitalization of DAI and MIM fell $2 billion, but this downward trend started on May 6, before the UST crash.

Footprint Analysis: Overcollateralized Stablecoin vs. BTC Market Cap

DAI is primarily collateralized by Bitcoin (BTC) and Ethereum (ETH), while MIM is collateralized by interest-bearing assets like yvDAme. When most cryptocurrency prices fall rapidly, the overcollateralized stablecoins they use as collateral also decline.

The recent drop in BTC, which has been affecting the price of cryptocurrencies, is again related to the US market. The Federal Reserve has taken steps to raise interest rates in order to stave off inflation, which has also caused a drop in US stocks. A clear downward trend is also observed in the Nasdaq 100 index.

The data in footprint analysis shows that the price of BTC was largely uncorrelated with the Nasdaq 100 Index until July 2021, but the correlation between the two has strengthened since then. While users once entered crypto in part to hedge their risk, crypto now looks like a highly leveraged version of the stock market.

Footprint Analysis – BTC Token Price vs Nasdaq 100

The UST crash has certainly dealt another blow to overcollateralized stablecoins, as Terra founder Do Know bought a large amount of BTC as margin for UST, putting further downward pressure on the market and causing more people to sell BTC out of fear. The failure of Do Know’s plan to bail out UST also sent the price of BTC to a near 1-year low, further impacting the liquidation of overcollateralized stablecoins.

However, DAI is minted not only through collateral like ETH and BTC, but also through a large number of stablecoin issues like USDC and USDP. Therefore, DAI was able to control the impact within a limited range. In contrast, MIM’s situation is not too good, after the market capitalization fell $2 billion in January, it fell another $2 billion in May.

Stablecoin Algorithmic Market

The UST unpeg shattered the newly built confidence in algorithmic stablecoins, and the price of USDN, which has a similar mechanism on the Waves chain, also instantly unpegged to $0.8 on May 11, before gradually pulling back.

However, as of June 5, the price was not yet fully anchored at $0.989. seen by footprint analysisthis is not the first time USDN has been so poorly anchored.

Footprint Analysis: USDN Price Trend

FRAX, which matched UST in market capitalization through May 9, also tumbled $1 billion. Since FRAX requires USDC and FXS to be minted, with USDC as collateral and FXS as algorithmic, FAX is relatively more stable than a fully algorithmic stablecoin. Although the price of FXS also fell, FRAX recovered after its market capitalization fell to $1.4 billion.

Footprint Analysis: Stablecoin Algorithmic Market Cap

FEI, which allows users to mint stablecoins with $1 in assets, is currently 168% collateralized and around 70% of assets on the protocol are ETH. FEI’s market capitalization is not large, at $500 million, and it hasn’t been affected much.

What is notable is that while the market capitalization of most stablecoins has fallen, USDD, a stablecoin issued by tronhas surpassed FEI’s market capitalization by $670 million as of June 5, making Tron the third largest TVL chain after Ethereum and BSC.

As is evident from the success of UST, users choose stablecoins based on safety and profitability. It can be said that USDD is optimized in UST, but USDD issuance, burning and primary market activities are managed by TRON DAO Reserve, and ordinary users can only trade USDD in the secondary market. Therefore, the stability of USDD is mainly related to the TRON DAO Reserve and its approved whitelist, and not much to do with the algorithm.

This changes the trust level of the algorithm users to TRON DAO Reserve. USDD also has a sticky interest rate of 30%, which is extremely attractive to users.


While the stablecoin market took a huge hit when UST crashed, there is also a new opportunity for some protocols like USDC and USDD.

In overcollateralized stablecoins, DAI remains first, and the gap with the once-prominent MIM has grown.

Concerns about USDT continue but it has weathered the storm so far.

Date and author: June 16, 2022, [email protected]

Data source: Stablecoins Analytical Footprint After UST Events Dashboard

What is footprint analysis?

Footprint Analytics is an all-in-one analytics platform for blockchain data visualization and insight discovery. Cleans and integrates on-chain data so users of any experience level can quickly start researching tokens, projects, and protocols. With over a thousand dashboard templates plus a drag and drop interface, anyone can create their own custom charts in minutes. Discover blockchain data and invest smarter with Footprint.

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This post How the UST Crash Changed the Stablecoin Landscape

was published first on https://cryptoslate.com/how-the-ust-crash-changed-the-stablecoin-landscape/


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