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Terra stablecoin passes flash crash test

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SEOUL: The world’s most used algorithmic stablecoin appears to have withstood a sudden cryptocurrency price crash in what could prove a watershed moment for its South Korean creators.

Terraform Labs came under scrutiny during a crypto market plunge in May when its flagship stablecoin ‘UST’ failed to maintain its peg to the US dollar – at one stage falling in value to US$0.92.

However, a 15% plunge in the price of Bitcoin on Tuesday had no such impact, with price tracker Coingecko showing its value didn’t drop any lower than US$0.98.

Terra’s CEO, Do Kwon, had promised to fix the problems that led to the May instability, and the coin’s performance in the latest downturn will only improve confidence in its long term future.

Faith in centralised stablecoin Tether (USDT) has been tested in recent times, amid questions over whether it’s fully backed by US dollar reserves and claims it’s exposed to Chinese debt. Tether has not commented on that particular claim and has pointed out it’s never denied a customer who wanted redemption.

According to Coingecko, UST is the world’s fifth largest stablecoin by market cap, behind USDT, USD Coin, Binance USD and DAI. It is, however, the leading stablecoin that operates algorithmically – its token LUNA acts as the reserve of the platform and ensures the stability.

Holders of the LUNA token have enjoyed a meteoric 7688% price rise over the past twelve months, with the coin currently listed as the world’s 16th largest in terms of market cap ($10,390,495,547).

Terraform Labs is continuing to develop use cases for UST, with the launch of platforms such as Mirror Protocol, Anchor Protocol and Pylon Protocol.

‘Mirror Protocol,’ for example, allows users to trade ‘Mirrored’ assets, such as stocks, precious metals. A recent governance vote passed a proposal that allowed mirrored Coinbase shares to be traded on the platform immediately after its initial public offering (IPO).  

Anchor allows a way for Terra stablecoin holders to earn significant rewards on deposits, with the current annualised return listed at 20%.

Related: South Korean crypto project achieving adoption | Asia Markets

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1 Comment
  1. Hensz says

    Terra has been doing absolutely amazing. The craziest thing is that while they are providing one of the most useful crypto products(non censorable stable coin), Luna captures the value of issuing this stable coin. It’s the most genius value capture in crypto.

    When USDT prints 1b and puts it into ETH has no impact on ETH.

    When UST prints 1b, it burns 1b worth of Luna.

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