The aftermath of the Terra (LUNA) incident and its partner, TerraUSD (UST), raises the question - will this incident produce ‘domino effects’?
UST, LUNA
While the Terra team has already implemented several recovery plans, to date there have been no positive signs for investors to breathe a sigh of relief.
Conscious or not, it has been four days since the value of UST 'dropped' from the US dollar with the worst record, $ 0.23 yesterday.
While LUNA speed touched the $ 0.20 zone today.
Stablecoins, an important role in the crypto ecosystem
Did the Terra collapse also affect other stablecoins?
For the record, this group of coins accounts for 13% of the total cryptocurrency market value.
What are stablecoins? Readers can refer to the article: Crypto Investors Should Know What Stablecoin Is
The author found that at the time the article was written, some stablecoins were recording price increases indicating fierce demand:
TrueUSD (TUSD) - 1.24%
Binance USD (BUSD) - 1.47%
Pax Dollar (USDP) - 0.76%
Dai (DAI) - 0.56%
Fei USD (FEI) - 0.49%
USD Coin (USDC) - 0.22%
Tether (USDT) --1.97%
This explains why demand is increasing for the above stablecoins as investors have already shifted interest, as claimed by Grayscale analyst Matt Maximo:
"About $ 10 billion of holdings from UST (holders) are looking for safer stablecoins."
This was also agreed by DeFi platform CEO, EQIFI; Brad Yasar who believes the stablecoin market will not be destroyed just because UST reflects other stablecoins.
But of course investors are still worried because the United States Treasury (US) is already bullying the crypto market after the UST incident caught the attention of its secretary, Janet Yellen.
The figure is seen as ‘excited’ to introduce the stablecoins policy as early as this year.
USDT, USDC, DAI
Undoubtedly USDT and USDC are the largest stablecoin assets in the crypto market.
Both are not the same as UST which retains its value through the combustion or production of LUNA.
According to Yasar, asset-backed stablecoins (such as USDT, USDC) will not be vulnerable to loss of value (de-pegg) as long as their treasury is in line with the amount of coins in the market.
But stablecoin algorithms (like UST) that do not rely on assets are easy to de-pegg when the market is unstable.
So it is no wonder USDT and USDC are known as stablecoin which offers low risk for its investors.
Yet the USDT has actually received a dumping of criticism for having commercial papers, bonds, loans, and some digital tokens in its treasury. Even so, commercial paper holdings are understood to have decreased quarterly.
This disclosure proves Tether has a strong conservative holding, and a liquid portfolio consisting of cash & cash equivalents.
While DAI is not left behind as the choice of most investors even though this coin is an algorithmic stablecoin like UST.
The only difference between DAI and UST is that MakerDAO (DAO) needs 150% of the collateral to produce DAI. Grayscale analysts once said:
"MakerDAO is better protected from the sharply depreciated value of collateral (DAI) overnight by having more collateral than DAI in the market."
While stablecoins other than UST offer attractive guarantees, investors should still DYOR so as not to be bumped before being bitten.
