Crypto

What Is Happening To Crypto Prices?

What is that old saying? — “You can’t have your cake and exchange it for a slightly more valuable cake too.” ???
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What Is Happening To Crypto Prices?

Many popular cryptocurrencies have taken sharp downturns after months in the red. As is usual in the crypto market, the decline has been rapid, but what has been unusual is the effects seen on the UST stablecoin, TerraUSD.  

Stablecoins are cryptos with a value attached to a real-world asset. TerraUSD is pegged at the value of the USD. Usually, potential volatility in a stablecoin is nothing to worry about, but TerraUSD is currently valued at $16.7B. This value is the problem; if it were genuinely reflecting the value of the US dollar, it would be over $18B.

What does it mean? Luckily the impact of the stablecoin's drop to $0.60 and recovery back to $0.90 does not impact any national economy. However, like loaning against the dollar, loans or decisions made in the crypto realm based on the stability of UST have taken a hit. 

How did this happen? UST was created by Terraform Labs, which also maintains its blockchain and a sister cryptocurrency called LUNA. The company facilitates an ecosystem that allows a UST to be traded for exactly $1 worth of LUNA at any time, no matter the current value of UST. The exchange requires the token to be "burned," AKA when a UST is exchanged for a LUNA, the UST is not for sale to somebody else but removed from the ecosystem entirely. This escape hatch has led to easy and profitable movement from UST to LUNA as investors fear UST value may continue to drop, which further destabilizes the coin echoing through the crypto world.

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