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- UST Lost Its Peg to USD - What does this mean for LUNA?
UST Lost Its Peg to USD - What does this mean for LUNA?
Are stablecoins still “stable” in the volatile markets recently? UST is on shaky ground as news comes about Terra, its major Bitcoin reserved, and plans for loans. Continue reading to get the daily crypto news you need!
The UST Drop
TerraUSD (UST) has now lost the USD dollar peg for the second time in a matter of three days. Crashing as low as about $0.65 yesterday, many crypto investors are now questioning the fate of both LUNA and its stablecoin, UST. After climbing back to $1, all eyes are on the UST as traders look to even more news from the Luna Foundation Guard.
The value of LUNA is now nearly on par with UST in market capitalization. This is yet another reason to contribute to the extreme fear in the crypto fear and greed index. With the recent market events, LUNA dropped a whopping 44% with a price of about $35 over the past 24-hours. The public continues to scrutinize LUNA and its ‘stablecoin’ as faith in the stability to maintain the peg is dropping.
The major drop comes after the Luna Foundation Guard (LFG) announced over the weekend that $1.5B of its Bitcoin reserves are going to be loaned in order to proactively defend the stablecoin, UST’s peg.
José Maria Macedo, LFG Council Member states in regards to yesterday’s events that it was, “the biggest stress test the system has ever faced”. Furthermore, analysts at Coindesk stated, “the bigger this thing gets, the worse it's gonna be for everybody involved”.
In reaction to the drop, Binance even halted withdrawals of LUNA and UST tokens due to "network slowness and congestion”. In an official statement, Binance wrote that they will reopen the withdrawals for LUNA and UST once the network is considered stable and pending withdrawals has reduced. Kraken and CoinList have also been added to the exchanges that are suspending transactions with these volatile coins. The NAGAX platform is currently operating as normal for LUNA and UST.
The Big Bitcoin Buys
As many know, The Terra Foundation Guard had been buying massive amounts of Bitcoin as a reserve (read here).
The foundation is controlled by a small group of people made up of key decision-makers buying the OG cryptocurrency, Bitcoin to help boost their own coin, LUNA. After buying tens of millions of BTC, the question still remains of where the foundation sourced these funds, and what this new loan will entail.
What are stablecoins?
In short, stablecoins are a type of digital asset built upon another coin’s blockchain. The goal of stablecoins is to create a crypto that is not as volatile as other well-known cryptocurrencies (hence stable). Stablecoins offer the convenience of the privacy and security like other decentralized assets while still aiming to offer the stability and trust of fiat money.
UST is a type of stablecoin in the Terra ecosystem where a smart contract-based algorithm keeps the price of UST to $1 at all times by burning (permanently destroying) LUNA tokens. This, in turn, allows the creation of minting UST tokens.
Stablecoins at NAGAX
Tether (USDT) Issued by Hong Kong-based company Tether, USDT is a stablecoin pegged to the US Dollar. As with all other stablecoins, its main purpose is to serve traders a digital currency with an unrestrictive Defi nature while keeping the stability of the US Dollar.
Terra (LUNA) USD Coin (USDC) Binance-Peg (BUSD) Celo Dollar (CUSD)
Stablecoin could be an option for traders looking to get their feet wet in the crypto market. To learn more about stablecoin and other crypto offerings. Be sure to check out the NAGAX Exchange.
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