If the price of TerraUSD slips below $1, investors are incentivized to buy TerraUSD so they can exchange it for luna and make a small profit, and vice versa when the price moves above $1. Investors can exchange one unit of TerraUSD for $1 of luna. Instead, it relies on its ties to cryptocurrency luna to maintain its value. TerraUSD works slightly differently from tether and Circle's USD Coin, the two biggest stablecoins, which are both backed by liquid assets. Stablecoins are cryptocurrencies that are designed to trade at $1 per token, giving traders a supposedly stable place to park their cash while they trade. TerraUSD was the world's third-biggest stablecoin before its dramatic "de-peg" from the dollar in recent days. The dramatic drop in TerraUSD and luna is a "death spiral" that could see confidence in the stablecoin evaporate entirely, analysts at research house Fundstrat said in a note. Luna, which is free-floating, was down 97% to $0.869. ET, according to Coingecko, having earlier dropped as low as $0.306. UST had tumbled to $0.375 Wednesday as of 9.31 a.m. Its sister cryptocurrency luna dropped more than 97% as rescue efforts failed to avert what analysts have called a "death spiral" that has shocked digital-asset investors. TerraUSD, a major stablecoin which is supposed to be fixed at $1, tumbled on Wednesday to as low as $0.30 as confidence in the crypto project evaporated. Sister cryptocurrency luna tumbled more than 97% as rescue efforts from Terraform Labs appeared to fail.Īnalysts labeled the drops a "death spiral" and questioned whether confidence would ever return to the Terra project. TerraUSD hit a low of $0.30 Wednesday as the supposed stablecoin slid further away from its peg after confidence evaporated. Cryptocurrency markets have been hit with a wave of selling in recent weeks.
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