UST loses dollar peg as Terra market cap slumps
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UST loses dollar peg as Terra market cap slumps
Terras dollar-pegged stablecoin, terraUSD (UST), depegged for the second time this week, dropping to as low as US$0.6841 in Tuesday morning trading in Asia, according to CoinMarketCap. It has since recovered slightly.
Fast facts
Terras price also dropped by over 60% of its value since late last week, resulting in a market capitalization of US$11.5 billion, less than that of its own UST.
UST is an algorithmic stablecoin of the Terra network, which uses the native token LUNA as collateral to peg the UST to the U.S. dollar.
Smart contracts are reportedly used to control the supply of LUNA to maintain the USTs dollar peg.
As Terras market cap is now less than UST, there is likely not enough capital to back the underlying token, affecting the peg.
The Luna Foundation Guard on Sunday said it would lend US$750 million of its Bitcoin reserves to stabilize USTs price following the depegging when USTs value fell under US$0.99.
These are the first major depegging events for UST since mid-March when Terra said it bought US$10 billion worth of.