Terra’s Bitcoin Reserves
UST has struggled to maintain its peg in recent weeks, leading the company to purchase Bitcoin reserves worth $1.5 billion. Do Kwon, the CEO of Terraform Labs, stated his intention to acquire Bitcoin reserves worth $10 billion to stabilize UST’s peg.
Over the past few days, the company lent out large sums of money in an effort to return the UST to $1, but this attempt ultimately failed. Following the collapse of LUNA, UST’s value dropped to under 50 US cents, and it now seems to be heading toward total collapse.
Despite the downturn, Terraform Labs remains one of the top holders of Bitcoin globally.
Bandora li ser Tether
UST was the third-largest stablecoin in the world and ranked among the top ten cryptocurrencies by market capitalization. Its collapse sent shockwaves through the crypto community and prompted massive withdrawals from Tether, the largest stablecoin. This caused Tether’s price to dip slightly to a low of 95 cents. However, it eventually regained its peg, despite over $3 billion being withdrawn from the network in a single day.
While both Tether and UST are stablecoins, they function very differently. According to Tether, its stablecoin is backed by actual US dollars, allowing it to maintain its 1:1 parity with the USD. Despite concerns about the size of Tether’s dollar reserves, it has managed to maintain its stability thus far.
It is crucial to note that much Bitcoin trading occurs in Tether, so a collapse of Tether would have far-reaching consequences for the entire cryptocurrency market. Investors typically turn to stablecoins like Tether during periods of market volatility.
Why the Collapse of LUNA and UST Matters
These two cryptocurrencies had large market caps and attracted a significant number of investors. Their collapse has left many investors in serious financial distress, and reports of self-harm have surfaced in the aftermath.
The downfall of TerraUSD has also raised questions about the stability of stablecoins. Some speculate that the collapse may have been the result of a targeted attack, and it remains uncertain whether other stablecoins might face similar fates.
Additionally, the collapse has prompted the US government to consider regulating stablecoins. Janet Yellen, the Secretary of the US Treasury, has pointed out the growing risks associated with stablecoins.
Thoughts Final
Yesterday, LUNA completely collapsed, leading to a sharp decline in the value of UST. The company had to temporarily halt the blockchain due to what it described as governance attacks. Both of these cryptocurrencies may never recover, as regaining the trust of the crypto community could be extremely difficult. The UST collapse has also spurred the US government to examine the regulation of stablecoins.
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