Another dramatic price crash happened with the stablecoin protocol Terra. UST is supposed to mirror the value of the dollar. However, the pegged currency plunged below 30 cents Wednesday, shaking investors’ confidence in the so-called decentralized finance space.
Stablecoins are the crypto version of bank accounts. Digital tokens’ investors rely on them for safety in times of volatility in the markets. Nonetheless, UST, an “algorithmic” stablecoin that’s underpinned by code rather than cash held in a reserve, has struggled to maintain a stable value as holders bolted for the exits en masse.
On Thursday, UST was trading at about 41 cents, still well below its intended $1 peg. Luna, another Terra token that has a floating price and is meant to absorb UST price shocks, erased 99% of its value and was last worth just 4 cents.
