Can the Stablecoin Bring 20% Annual Income? Terra Lived in Lies Until Died

Written by C, Fiona

Last updated: 2022-05-27

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Stablecoin plays an important role in bringing stability to the cryptocurrency market. For those who are very interested in cryptocurrency but are worried about rampant fluctuations, a stablecoin has always been an ideal choice. stablecoin is a kind of cryptocurrency supported by assets, and the most common is legal currency. However, they retain most of the appeal of other cryptocurrencies, allowing investors to enter a new and evolving asset class. However, the recent collapse of Terra Luna and TerraUSD has caused investors to reconsider their investment choices.

What are the Best Stablecoins That Can Earn Interest?

The stablecoin has played an important role in bringing stability to the cryptocurrency market. These cryptocurrencies supported by legal currency act as a buffer for investors who frequently participate in cryptocurrency transactions, enabling them to protect their funds from market fluctuations.

In the past year, the stablecoin has been more adopted and applied in the cryptocurrency ecosystem. With the total circulation and supply of more than 130 billion US dollars, the stablecoin linked to the US dollar has increased by more than 500%, and it is expected that the stablecoin will continue to grow as more investors join the cryptocurrency ecosystem.

What Happened After Terra and TerraUSD Crashed?

According to coinmarketcap, TerraUSD (UST) is the third largest stablecoin in market value and the largest algorithm stablecoin. To maintain its value, it relies on an independent cryptocurrency called Luna, whose price is variable. When the price of ust is lower than US $1, the trader can burn the UST — remove it from circulation and raise the price again. They will get the equivalent of $1 Luna. However, when the price of ust rises to more than $1, traders can burn Luna and get the equivalent UST. Ust has some bitcoin collaTerral, but it mainly relies on its algorithm to maintain its peg to the US dollar.

The price fell below $1 and then fell further, igniting a large-scale sell-off, which brought the price of ust to a low of $0.25 on May 11, although it had risen to $0.42 as of May 12. The related cryptocurrency Luna dropped sharply from $116 at the beginning of April to $0.0042 at the time of publication. As of May 12, the total market value of Luna and ust was $5.5 billion, down 88% from the beginning of the month.