UST (TerraUSD) is collapsing, can’t use Bitcoin to rescue yet

TerraUSD is a stablecoin (stablecoin) similar to Tether, pegged to USD at a 1:1 exchange rate. Last week, the turmoil of the crypto market raised fears that the coin will fall victim to a sell-off.

The Luna Foundation Guard (LFG), an organization of investors at Terraform Labs – the developer of TerraUSD, has proposed a plan to use a digital reserve coin to prevent its collapse.

However, it seems that things are becoming too late for UST. At the afternoon of May 11, this coin is selling off when it is only trading at 25 cents and shows no signs of support.

The lack of a formal structure to handle the crisis of confidence in the USD pegged rate has hit the UST hard.

According to the plan, LFG has pooled more than 3 billion USD, mainly in Bitcoin, in case the UST cannot keep the anchor rate. However, it took weeks to perfect the technical processes to bring this reserve money into the blockchain via a smart contract to stabilize the UST rate.

In addition, even in the event that the LFG somehow quickly pulls back the rate, the currency has already suffered heavy losses.

Investors are fleeing Anchor, the exchange built on top of Terra blockchain, which creates a major demand for UST. In just the past few days, more than 60% of the accounts deposited here have massively withdrawn.

UST was one of the largest crypto-stables with a market cap of around $18 billion before the crash hit last week. The collapse of UST is forecasted to create shock waves to the whole market electronic money.

Vinh Ngo