The UST Stablecoin has lost its connection to the dollar, coinciding with a major downturn in the market cap of its associated token, Luna.
CoinMarketCap estimates Recent reports indicate that TerraUSD (UST) has dropped to a concerning low of $0.65 — marking the second drastic decline in a mere three days. As UST severed its dollar link, its partner token LUNA saw a staggering 44% drop in value within a single day, settling around $35.
In response to these alarming developments, Binance — known as one of the largest players in the crypto exchange arena — announced that it had halted withdrawals for both LUNA and UST due to a surge in pending withdrawal requests, promising to restore withdrawal functionalities once network stability returns. cryptocurrency exchanges in the world — announced UST is designed to function alongside LUNA to maintain its one-dollar valuation, allowing traders to seamlessly swap one dollar's worth of UST for an equivalent amount in LUNA. The variable pricing of LUNA is intended to provide UST with a stability buffer against market volatility.
This recent downturn might force UST's market capitalization to fall below that of its counterpart, posing a serious threat to UST’s stability mechanism. This could lead to a situation where users might struggle to convert their $1 UST back into $1 LUNA, effectively triggering a bank run on Terra.
CoinDesk notes 1/ In recent days, the cryptocurrency market has experienced substantial volatility.
The major concern regarding this instability lies in the dependence of UST on Bitcoin reserves; a disruption in the link between UST and its dollar value could further diminish Bitcoin’s market value —
— an outcome that would likely have detrimental effects on the entire crypto market. Most crypto enthusiasts are probably wary of witnessing such an event unfold right now. already in freefall Note: Steve Huff does not hold any of the cryptocurrencies mentioned above.
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