Terra Is Living Proof That Stablecoins Aren’t As “Stable” As They Seem

Jonathan Hobbs

5 months ago3:34 mins

Terra Is Living Proof That Stablecoins Aren’t As “Stable” As They Seem

The cracks began to show over the weekend for bluechip blockchain Terra, when its TerraUSD (UST) stablecoin detached from its US dollar peg. The shakeup has sent the price of Luna – UST’s more volatile counterpart – down more than 60%, knocking the crypto out of the top 10 digital assets by market size. So let’s investigate what happened, and what it might tell you about stablecoins as a whole.

What’s the relationship between UST and Luna?

First, a bit of background on the relationship between UST and Luna.

Terra’s blockchain ecosystem uses crypto technology to do what the traditional financial system does, but with algorithmic stablecoins that track the price of fiat currencies. For example, TerraUSD (UST), the largest algorithmic stablecoin, tracks the US dollar, and TerraKRW (KRT)

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