Bitcoin, the world’s largest cryptocurrency, has fallen more than 50% since setting an all-time high of around $ 69,000 in November.
Dan Kitwood | Getty Images
The two main tokens from the interrupted crypto project Terra are now in Freefall.
UST, a so-called stablecoin to hold $ 1 peg, plunged more than 60% on Wednesday from 24 hours earlier. According to CoinGecko data, it was trading at just 35 cents at 4 am ET.
Sister Token Luna has plunged more than 80% to 5.
Other cryptocurrencies have crashed alongside them, with Bitcoin down 5% to $ 30,321 and Ether down 4% to 28 2,286.
Stablecoins are like bank accounts for the crypto economy, while cryptocurrencies like Bitcoin offer a good store of value to avoid that kind of volatility – theoretically, at least.
UST, the world’s third-largest stablecoin, uses a complex system of minting and burning tokens to adjust supply and stabilize prices. Its price has recently plummeted under pressure to stop selling in cryptocurrency, causing further panic in the market.
Do Cowan, the creator of the currency, has raised billions of dollars worth of bitcoins to help in the UST crisis through his Luna Foundation Guard Fund. Now the fear is that the Luna Foundation Guard will release those bitcoins, which will lead to bigger sales.
Bitcoin fell briefly below $ 30,000 on Tuesday, its lowest level since July 2021. The world’s largest digital currency is now hovering slightly above that level It’s down nearly 56% since setting an all-time high of about $ 69,000 in November.
David Moreno Darocas, a research analyst at CryptoCompare, said the situation highlights the “fragility” of algorithmic stablecoins like the UST.
“UST has become an integral and controversial part of the crypto ecosystem,” he said.
The phenomenon is still relatively new. But UST has become a major player in the crypto economy, providing nearly 17 billion tokens.
Investors are now closely monitoring how the Luna Foundation Guard responds to support his ailing Stablecoin. Kwon said Tuesday that he was “close to announcing a recovery plan” for the UST. He tweeted, “Stay tight.”