Terra’s stable coin, UST, falls below $1 for the first time since its launch. The value of Terra USD has slipped below the dollar mark, hitting a low of $0.69, exacerbating the crypto market’s overall decline.
The Luna Foundation Guard (LFG), a non-profit organization responsible for maintaining the peg, announced its intention to lend $750m in Bitcoin and $750m UST to traders to “proactively defend the stability of the $UST peg and Terra’s economy in general”. Terra’s own asset, Luna, which is supposed to help UST maintain its one-to-one peg to the dollar, crashed by more than 60% during the worst of the de-pegging cycle.
In recent months, Terra has been buying Bitcoin and Avalanche for the UST treasury, and in very volatile times this tactic can come under pressure. If the de-pegging of UST continues, LFG may be forced to liquidate its bitcoin positions, which could send major shockwaves through the already fragile crypto market.
TFC POV: Stable coin might not be able to serve its purpose and what would that mean for the other stablecoins in the market. This will mean a BIG question mark for most crypto investors and confidence in cryptocurrencies could deteriorate further.
TFC Team
thefirm.sg