TerraUSD, or UST, sank below 70 cents for the first time late Monday, as holders continued to flee the token in what some have described as a “bank run.” The token fell as low as 62 cents before regaining ground to trade at 90 cents Tuesday, according to Coinbase data.
Created by Singapore-based Terraform Labs in 2018, UST is what’s known as an “algorithmic” stablecoin. Part of the Terra blockchain project, it’s meant to track the value of the dollar, like fellow stablecoins tether and USDC.
However, unlike with those cryptocurrencies, Terra doesn’t have cash and other assets held in a reserve to back its token. Instead, it uses a complex mix of code — alongside a sister token called luna — to stabilize prices.
It’s important for bitcoin investors as Luna Foundation Guard, an organization supporting the Terra project, is sitting on billions of dollars in bitcoin that could potentially be dumped onto the market at any point.
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