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An Overview Of The Stablecoin Market

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The U.S. dollar accounts for nearly 100% of stablecoin value and a window of opportunity for policymakers has emerged with the collapse of UST.

In this excerpt from Bitcoin Magazine Pro, we will take a more in-depth look at the redemption mechanism of USDT, and cover why the concerns about the stablecoin and the apparent risks it presents to the bitcoin/cryptocurrency ecosystem.

Before digging in, it should be said that the advent of bitcoin on a long enough timeframe obfuscates the need for a “stablecoin,” which is really just a blockchain-based IOU held by a counterparty. A digital bearer asset that is completely stable on the protocol level and from an issuance and absolute supply perspective that can be held with no counterparty risk is the innovation. With that being said, the natural demand for dollars in the “crypto-economy” does make sense given the dollar’s incumbent status as the world reserve currency.

With today’s release and focus on stablecoins, as well as the recent collapse of UST, an interesting window of opportunity for policymakers has emerged to provide guidance and clarity to stablecoin issuers, which would result in a rising demand for monetizing U.S. Treasury debt. After all, in the cryptocurrency ecosystem, USD stablecoins account for nearly 100% of stablecoin value. Given the dollar’s role as the world reserve currency today, this makes intuitive sense.

The U.S. dollar accounts for nearly 100% of stablecoin value.

The main takeaway from the rapid growth of stablecoins over the past two years is that despite the emergence of a digital monetary bearer asset with a fixed supply (bitcoin), there still is demand for a bearer instrument form of dollars, even if accompanied by trade-offs. All in all, a vibrant market for stablecoins ultimately will lead to smoother rails to bitcoin itself for those without access to the walled garden Western financial system, without offering the assurances of bitcoin’s monetary policy or decentralization.

The is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

Tron DAO Reserve Acquires Millions in TRX, Bitcoin, and Tether to Safeguard USDD

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Tron DAO Reserve Acquires Millions in TRX, Bitcoin, and Tether to Safeguard USDD

Seven days ago, Bitcoin.com News reported on the Tron DAO Reserve purchasing $38 million in tron to safeguard the network’s stablecoin USDD. Since then and since the terrausd (UST) de-pegging event, the Tron DAO Reserve has continued to purchase large quantities of digital assets to bolster the project’s reserves. In addition to the tron purchases, the organization has been adding stablecoins and bitcoin into the mix as well.

While Terra’s Stablecoin Imploded, Tron’s Algorithmic Dollar-Pegged Crypto Project Purchases Millions Worth of Tron, Bitcoin, and Tether to Defend USDD

During the past week, all eyes have been focused on the Terra blockchain and its native crypto assets LUNA and UST. Both coins divebombed significantly in USD value and more than $46 billion in value disappeared from the crypto economy in roughly three days. Amid all the carnage, the Tron DAO Reserve has continued to purchase crypto assets for its digital currency-based forex reserves. On May 7, Bitcoin.com News reported on Tron’s founder Justin Sun and the Tron DAO Reserve purchasing $38 million in tron (TRX).

Since then the project has continued to buy crypto amid the market carnage that took place because of the UST fallout. Tron’s stablecoin USDD is also an algorithmic dollar-pegged crypto asset that has similarities to Terra’s UST. After the purchase of 504.6 million tron (TRX), the Tron DAO Reserve tweeted that the team aims to “guard the overall blockchain industry and market, prevent panic trading caused by financial crises, and mitigate severe and long-term economic downturns.” The Tron DAO Reserve (TDR) further added:

We also manage the permissions of USDD as its early custodian and ensure its price stability with reserves.

After the 504.6 million tron purchase, the TDR continued to add funds into the reserve this past week. “To safeguard the overall blockchain industry and crypto market, Tron DAO Reserve have bought 500 BTC with an average price $31,031.35 for $15,515,675,” TDR detailed on May 10. The same day, the TDR said it purchased 595,729,832 tron for $45.6 million. While the crypto market was chaotic that day the TDR team noted “USDD holds steady in today’s market volatility.”

The following day on May 11, the TDR team tweeted: “To safeguard the overall blockchain industry and crypto market, [TDR] have bought 1,000 BTC with an average price of $30,096 for $30,096,000.” Following that purchase, the TDR organization bought 1,467,612,695 TRX for $97 million for the reserves. The TDR then started to buy stablecoins after the $97 million worth of tron was purchased. The TDR team explained on May 12:

To safeguard the overall blockchain industry and crypto market, [TDR] have bought 100,000,000 USDT with an average price of $0.982 with $98,200,000.

The TDR team did not stop there and has continued to purchase more coins to safeguard the Tron network’s stablecoin USDD. The TDR said on May 12, it purchased 200 million USDT for $0.985 per unit which added up to around $197 million in U.S. dollars. The Tron-based stablecoin reserve team then bought 1,249.57 BTC at an average price of around $29,394.

Tron’s Justin Sun ‘Still Believes in Algorithmic Stablecoins’

Currently, on Saturday, May 14, 2022, the USDD stablecoin has a market valuation of around $272.36 million and there are 271,438,207 USDD in circulation at the time of writing. During the past day, USDD has seen $85.5 million in global trade volume and the crypto asset is 156th largest market cap.

Similar to the Terra blockchain’s mechanism of burning LUNA to produce UST, to mint a single USDD it costs $1 worth of tron to issue the crypto asset. This means it can grow as large as the market allows it as it allows anyone to mint the stablecoin in a permissionless manner. However, with the market turmoil that took place because of the UST de-pegging event, it is safe to say the crypto community is leery of algorithmic stablecoin assets.

Despite the issues this past week, Tron founder Justin Sun talked to Coindesk’s Tracy Wang and he said that he is still optimistic about the algorithmic stablecoin model. “I still believe in algorithmic stablecoins,” Sun explained to Wang during a Zoom interview.

What do you think about the USDD stablecoin project created by the Tron team? What do you think about the TDR’s purchases this week? Let us know what you think about this subject in the comments section below.

Stablecoin Implosion — LUNA and UST Lose Significant Value, Downturn Ripples Across the Crypto Economy

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Stablecoin Implosion — LUNA and UST Lose Significant Value, Downturn Ripples Across the Crypto Economy

During the last few days, the crypto economy has been tumultuous as billions have fled the market in search of safety. The issues with LUNA sparked a significant sell-off as Terra’s native digital asset dropped 97% in value against the U.S. dollar in 24 hours. Terrausd has slipped 67% lower than the $1 parity and was trading at a low of $0.299 per unit at 9:00 a.m. (ET).

Terra’s Native Token LUNA Loses 97%, While UST Loses 67% in 24 Hours

The Terra blockchain ecosystem has been ravaged by the events that took place over the last few days, when the network’s algorithmic stablecoin terrausd (UST) started to lose its U.S. dollar peg. Project founder Do Kwon and the Luna Foundation Guard (LFG) also explained that the team was lending $1.5 billion in bitcoin (BTC) and terrausd (UST) to help defend the peg. The effort was a fruitless endeavor and UST slipped to $0.66 per coin but then, for most of the day on Tuesday, UST managed to climb back above the $0.90 region.

On Tuesday evening, UST started to plummet again and it has continued to slide to its most recent lows at $0.299 per unit. The native token LUNA suffered even more than UST, as it has lost 97% in value during the past 24 hours. LUNA has had a 24-hour price range between $33.93 per unit and $0.810 per coin. Furthermore, after Do Kwon said to stay strong and a plan was on the way, the Terra co-founder addressed the public on Twitter.

“Before anything else, the only path forward will be to absorb the stablecoin supply that wants to exit before UST can start to repeg,” Kwon said. “There is no way around it. We propose several remedial measures to aid the peg mechanism to absorb supply. First, we endorse the community proposal 1164 to Increase basepool from 50M to 100M SDR *) Decrease PoolRecoveryBlock from 36 to 18 This will increase minting capacity from $293M to ~$1200M,” the Terra co-founder added.

Kwon also said that Terra could rebound from the collapse and noted that the project was not going anywhere. “Terra’s return to form will be a sight to behold,” Kwon tweeted. The Terra founder added:

We’re here to stay. And we’re gonna keep making noise.

‘Worse Than Bitconnect’

Of course, under the circumstances of many individuals losing money and some of them losing everything, many people criticized the response from the Terra founder. The podcast host Peter McCormack asked Kwon “What % chance to you give it that the same won’t happen again?” Bitcoin supporter Hasu said the UST event was “worse than Bitconnect.” “At least Bitconnect didn’t masquerade as a stablecoin,” Hasu added. “When your ponzi targets people’s savings (not investment) portfolio, there is a special place in hell reserved for you.”

In addition to the criticism, people have been trying to buy the dip because they believe a strong comeback will happen. However, while doing so, many crypto traders are getting wrecked by the price volatility. Additionally, crypto Twitter (CT) influencers are deleting tweets that discuss UST and LUNA in a positive light. Furthermore, the crypto liquidity provider Genesis explained that the company has “no direct exposure to UST and LUNA.” Individuals are also claiming that the downfall of LUNA and UST was a “coordinated attack.” “Market manipulation at its finest,” one individual tweeted.

Other Terra supporters have been watching bots on Twitter and have stated they are certain Terra’s issues were the result of a blatant attack. There have been odd sightings of bots or Twitter accounts repeating the same statement, which can be found here, here, here, here, and here. While LUNA and UST have not yet plummeted to zero, people are either betting that they will or they believe Do Kwon and think a massive reversal is in the cards. By 10:45 a.m. (ET), UST was trading for $0.504 per unit.

CEO of Sator Says Luna Foundation and Do Kwon May Still Hold Bitcoin Reserves

Isla Perfito, the CEO of Sator, a community-first Web3 content engagement platform, said that there may be a chance the Luna Foundation Guard (LFG) still holds bitcoin. “People assume LFG already sold their BTC,” Perfito told Bitcoin.com News in a statement. “That’s why UST is pricing at .40 on the dollar. In the event that they have the BTC, their backing is better. Do Kwon should provide a balance snapshot of his BTC to save UST. The CPI numbers came in higher than expected today.” The CEO of Sator added:

In my opinion, inflation has peaked. Investors are now waiting for the stock market to bottom. With UST, 1 LUNA could be exchanged for 1 UST and vice versa. This is why we observed the Luna crash — when they decided to not keep the peg, they were selling Luna coins. With that said, there’s a chance that they have reserves to save UST.

Alex Tapscott, the managing director of the digital asset group at Ninepoint Partners, explained to Bitcoin.com News on Wednesday that Terra’s issue is similar to a hedge fund exploding. “This is not unlike what happens when a large hedge fund ‘blows up’ and is forced to unwind its positions,” Tapscott explained in an email. “It becomes a price taker causing the assets its own to suffer (though often just temporarily).” Tapscott continued:

Long term the thesis on Bitcoin and crypto remains intact. Bitcoin is the first digitally native money for the internet and crypto assets as a whole represent a 2nd era of the internet – an internet of value- that will continue to transform and rethink many industries.

What do you think about the LUNA and UST fiasco and how things have been unfolding? Let us know what you think about this subject in the comments section below.

UST Rebounds From $0.66 per Coin to $0.93, Crypto Community Assesses Stablecoin’s Damaged Reputation

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UST Rebounds From $0.66 per Coin to $0.93, Crypto Community Assesses Stablecoin's Damaged Reputation

On Monday, May 9, 2022, the stablecoin terrausd (UST) lost its parity with the U.S. dollar and dropped to an all-time low of $0.66 per unit. The stablecoin has been one of the most topical discussions in crypto during the past 24 hours, as many have been betting on whether it will fail or recover. However, by 9:15 a.m. (ET) on Tuesday morning, the stablecoin has managed to climb back to $0.934 per unit.

** This article has been updated at 1:00 p.m. (ET) to include commentary from an unnamed source regarding specific claims stemming from social media.

UST Stablecoin Plunged to $0.66 per Unit, Rumors Spread Like Wildfire

The Terra blockchain project has been suffering in recent times, as the network’s native asset LUNA has shed 43.6% against the U.S. dollar during the past 24 hours. Moreover, the stablecoin terrausd (UST) has also been dealing with intense pressure as the token’s value plummeted from $0.99 to a low of $0.66 per unit. On a few exchanges, UST dropped as low as $0.62 per unit during periods of extreme selling. Just before UST dipped $0.09 lower than the $1 peg, Terra’s co-founder Do Kwon told the public that the team was “deploying more capital.”

During the course of Monday evening, the Luna Foundation Guard (LFG) emptied the LFG bitcoin wallet that once held approximately 70,736.37 BTC. Currently, there is zero bitcoin in the wallet as it has been drained dry. The same can be said for the LFG Gnosis safe address, as the ethereum address held $143 million on May 3. Today, the wallet holds $135.58 in ether, and a few other ERC20 tokens with small values. While LFG and Do Kwon told the public on Monday that $1.5 billion in bitcoin and UST would be lent to market makers, the current moves have been less transparent.

While UST plunged to $0.66 per unit, a large number of theories swirled around the crypto industry. There have been claims that the multinational hedge fund and financial services company Citadel was involved. However, a person familiar with the firm’s operations told Bitcoin.com News on Tuesday:

From a factual standpoint, Citadel does not trade stablecoins, including UST.

Reports further claim that Binance order books had paused during the UST sell-off. For a small period of time, Binance paused LUNA and UST withdrawals. Additionally, there’s been talk of well-known crypto funds bailing out Terra as well, by funneling billions back into the stablecoin’s ecosystem.

“There is a rumor spreading about Jump, Alameda, etc. providing another $2B to ‘bail out’ UST,” theblockcrypto head of research Larry Cermak tweeted on Monday evening. “Whether this rumor is true or not, it makes perfect sense for them to spread. The biggest question here is, even if they can get it to $1 by some miracle, the trust is irreversibly gone.”

After UST Rebounds to $0.93, People Question Trusting the Stablecoin Project, Anchor TVL Slips by 43% in a Single Day

Discussions about people losing trust in LUNA, UST, and Terra, in general, have been littered all over social media. “No matter how this ends, I don’t want people to call UST decentralized again,” the bitcoin advocate Hasu tweeted on Monday. “Even the little collateral backing it has is intransparent and controlled by a single party. Used to perform discretionary open market operations. This is like 10x worse than the Fed,” Hasu added.

Investor Lyn Alden also made a statement about the Terra disaster after she predicted it could happen last month. “Terra’s multi-billion-dollar algorithmic stablecoin UST blew up today,” Alden said. “Aside from destroying the value of LUNA, they used their bitcoin reserves to try to defend the peg, kind of like a flailing emerging market using its gold reserves to defend its FX.”

During the overnight trading sessions and into the trading sessions on Tuesday morning, UST has been recovering from the losses. So far, terrausd (UST) has managed to climb back to $0.934 per unit, or down 6% from the $1 parity. Terra’s co-founder Do Kwon has not tweeted since saying the ‘A-team’ was deploying capital, even though the co-founder is very well-known for defending his project. At the same time, LFG has also not updated the public since its last tweet, which said it would provide more updates.

In addition to the problems with LUNA’s and UST’s price, the decentralized finance (defi) lending protocol Anchor has shed 43.7% of its total value locked (TVL) during the past 24 hours. At the time of writing, Anchor has a TVL of around $7.22 billion and $95.08 million is Avalanche-based collateral. Anchor was once the third-largest defi protocol, and it has dropped down to the sixth position on Tuesday.

Many wonder what’s going to happen if UST regains its $1 parity with trust in the stablecoin so shaken. Many UST owners could be waiting for the $0.99 area or close to that range, so they can cash out of the stablecoin and move into something else. At $0.934141, UST is closer to the $1 parity, but an investment of 5,000 UST would only equate to $4,670.70 at current prices.

What do you think about the Terra project’s issues and the recent UST de-pegging? Let us know what you think about this subject in the comments section below.

As LUNA’s Price Drops Over 33% in 24 Hours, Stablecoin UST Slips Below $1 Parity to $0.93

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As LUNA's Price Drops Over 33% in 24 Hours, Stablecoin UST Slips Below $1 Parity to $0.93

As bitcoin dropped to fresh new lows on Monday, the price of terra (LUNA) slid by 33.3% during the last 24 hours. Moreover, the project’s stablecoin terrausd (UST) has lost stability, dropping to $0.932008 per token. Additionally, the Luna Foundation Guard’s bitcoin wallet and ethereum Gnosis safe address has been emptied.

**This article was updated with a new paragraph to reflect the price of terrausd (UST) dropping to $0.86 per token on Monday, May 9, 2022, at 6:10 p.m. (ET). It also mentions the Luna Foundation Guard bitcoin wallet that holds 28,205 bitcoin at the time of writing. By 8:15 p.m. (ET), terrausd (UST) hit a low of $0.704843 per unit, down 29.4% during the last 24 hours.

LUNA Price Puts Intense Pressure on Terra’s Stablecoin UST

During the past 24 hours, more than $830 million has been liquidated from the crypto economy, and the price of bitcoin (BTC) sunk to lows not seen since January 2022. Over the past seven days, BTC has shed 20.2% in value against the USD, and 11% of the value was shaved during the past 24 hours. Furthermore, numerous crypto assets have seen deeper losses as terra (LUNA) dropped by 33.3%.

As LUNA's Price Drops Over 33% in 24 Hours, Stablecoin UST Slips Below $1 Parity to $0.93

The stress has caused the project’s UST peg or $1 parity to slip beneath the dollar value. At its lowest point on Monday, terrausd (UST) dipped to $0.932008 per unit according to Coingecko.com statistics. UST’s 24-hour price range on Monday has been between $0.932008 to $0.999601 per unit.

Luna Foundation Empties Bitcoin and Ethereum Wallets

In addition to the losses, UST and LUNA took on Monday, after revealing the Luna Foundation Guard (LFG) would lend $1.5 billion in BTC and UST, both LFG’s public bitcoin and ethereum wallets have been drained. The LFG bitcoin wallet once held 42,530.82 BTC but sent the entire stash in a single transaction to another wallet. Additionally, LFG’s Gnosis safe address, which once held millions of dollars in USDC and USDT, has also been drained.

On May 3, the LFG Gnosis safe address held $143 million and today, it currently holds $195. At 2:36 p.m. (ET), Terra co-founder Do Kwon tweeted “Deploying more capital – steady lads.” UST’s price has seen some improvement on Monday after the deployment of capital, but has been down between 4.5 to 6.5% during the last few hours.

As LUNA's Price Drops Over 33% in 24 Hours, Stablecoin UST Slips Below $1 Parity to $0.93

While other stablecoin assets like USDC and USDT have felt pressure today seeing much smaller percentage losses, the two largest stablecoins by market cap have held their pegs. Tether slipped down to $0.995691 per unit on Monday, while usd coin (USDC) dipped to $0.994630 per unit.

Binance usd (BUSD) is exchanging hands for $0.996616 and DAI has been trading for $0.995420. Most USD pegged stablecoins besides UST remained trading for at least $0.975328 to $0.99 per token. Meanwhile, toward the end of writing this article at 4:00 p.m. (ET), UST has been trying to regain the $1 parity but has yet to accomplish the goal. At press time at 4:30 p.m., the stablecoin UST has managed to jump to $0.956017 per unit.

** On May 9, 2022, at 6:10 p.m. (ET), UST’s value slipped to a low of $0.86 per token, according to market data stemming from coingecko.com and multiple reports from social media. At 4:47 p.m., the Luna Foundation Guard (LFG) updated the public about its bitcoin (BTC) wallet. LFG also noted that “updates were coming.” The LFG bitcoin wallet holds 28,205.54 BTC at 6:10 p.m. on Monday, and it once held 70,736 BTC.

By 8:15 p.m., terrausd (UST) hit a low of $0.704843 per unit, down 29.4% during the last 24 hours. Moreover, the UST de-peg conversation has been one of the most topical crypto discussions on social media and forums during the course of the day.

What do you think about the stablecoin UST dropping from its $1 parity on Monday? Let us know what you think about this subject in the comments section below.