UST Implodes Taking the Market Down With It

In case you've been away from your computer over the past few days, the biggest story in crypto right now is the slow-motion disaster happening over at Terra.

Terra of course is the company behind the stablecoin, TerraUSD (UST), and its secondary token, Terra (LUNA), which powers the Luna blockchain

The Backdrop: 

Without getting into the nitty-gritty details, Terra had set up their stablecoin apart from the rest. Unlike longer-established stablecoins, such as those issued by Tether (USDT) and Circle (USDC), Terra was pegged to the U.S. dollar through an algorithm. Stablecoins like USDT, on the other hand, are pegged to the U.S. dollar through cash and cash equivalents.

What Happened?!

The short answer is well, we don't exactly know yet. All that we know for sure is that Terra's fancy algorithm appears to have fallen apart quicker than glass hitting a tile floor.

The end result has been an utter disaster. UST started losing its peg over the weekend and it has only gone from bad to worse.

Terra's LUNA, which was designed to support the price of UST, has collapsed and is now trading down 93% over just the last 24 hours. UST, Terra's stablecoin, on the other hand, is currently trading for just 70 cents after falling as low as 30 cents over night.

It was only a week ago when UST and LUNA were both in the top 10 largest tokens by marketcap. Fast forward to today, and it appears they are fighting for their last breath.

As you can imagine, this has triggered a rippling effect across the entire crypto ecosystem and has single-handedly caused the market to panic. Rumors are spreading like wildfire, crypto funds are freaking out, regulators are calling for action, and investors are running for the exits.

It's a sad, sad day for the all the LUNAtics out there. And until we can get more clarity on the situation (and a clearer picture of what caused what), we're going to let this play out. Perhaps we'll cover it (and all the lessons learned) in next week's issue..