Recently, UST has become the center of attention after falling sharply below the $1 mark. As a stablecoin, UST uses the code to maintain its exchange rate against the USD based on an algorithm, thereby allowing it to be exchanged for Luna and vice versa to help maintain value.
Unlike rival stablecoin like Tether and USD Coin, UST is not backed by any real assets. Instead, the currency is backed by a nonprofit called Luna Foundation Guard, created by Terra founder Do Kwon. The organization currently holds about $3.5 billion in Bitcoin reserves.
Therefore, at a time when the market had many fluctuations like last week, the value of the UST had dropped to an unprecedented level in history.
When the value of UST lost the $1 mark, investors rushed to sell related Luna codes. According to data from Coin Metrics, Luna's price dropped from about $85 to about $0.04 on May 12, making the cryptocurrency almost worthless.
As one of the world's largest cryptocurrency exchanges, Binance said that the Terra network, a block chain linked to Luna, is in serious trouble.
Binance said there is a sign that investors are rushing to sell Luna, which is a large number of withdrawal transactions from the Terra network waiting to be processed on their exchanges. For this reason, the exchange had to temporarily stop Moon's withdrawal for several hours due to congestion.
Debate over the TerraUSD (UST) is spreading widely in the market because the Luna Foundation Guard is holding a large amount of Bitcoin as a form of reserve and now the organization may have to sell the Bitcoin to support prices for UST.
Over the past 7 days, Bitcoin prices have fallen more than 29% and fell below $26,000 on May 12, the lowest level since late December 2020.
Meanwhile, the world's largest stable pair, Tether, also fell below the $1 mark on the same day as the cryptocurrency market became increasingly chaotic.
