Death of UST and Terra Luna. How to save money, what to do with USDT, BUSD, USDC and other stablecoins?
By Yaroslav Krasko Updated November 21, 2022
Last week was shocking even for most experienced traders and cryptocurrency experts. Starting with the fall of the cryptocurrency market, and continuing with the complete collapse of the Luna project and the UST Stablecoin.
- What happened to UST and the LUNA coin?
- Should I sell or buy UST and LUNA?
- Can stabelcoins (USDT, BUSD, USDC etc) crash like UST?
- Should I sell USDT, BUSD, USDC?
In this article, we'll answer all of these questions and give advice on what to do with stablecoins and how to save your funds.
What happened to UST and Terra Luna?
The UST is a stablecoin that should technically depend on the dollar and have a price ratio of $1 to 1 UST. But the exchange rate of the coin is not secured by anything, unlike the USDT, which is secured by real dollars in the ratio of $1 to 1 USDT. UST is supported by algorithmic systems and is fully integrated with the LUNA project.
If the price of UST is more than $1, coin owners can "burn LUNA coins" and get UST, keeping the difference for themselves. This increases the supply of stablecoins and, therefore, decreases their value. If the value of a stablecoin is less than $1, the reverse operation occurs. On May 10, the Terra Luna system faced a catastrophic devaluation, after which the system became uncontrollable and the price began to decline rapidly.
Currently, the price of UST = 0.11 cents. That is, if you kept your money in this stablecoin, each of your dollars turned into 11 cents.
At the same time, Luna, recently priced at $120, lost 99.9% in its price. The coin, which was ranked 11th by coinmarketcap in terms of capitalization ($11 billion), completely collapsed in price in just one day.
It's hard to even imagine how the holders of these coins feel right now. If you are one of such holders, we advise you to read the rules of risk management and risk diversification.
In addition, we get a lot of questions: whether the price of UST and LUNA will be restored, whether it is worth selling these coins, what to do and so on.
As of today, the largest cryptocurrency exchange Binance has delisted these coins from the exchange.
And the CEO of KZ Binance stated in his tweet the following: "I am very disappointed with how this UST/LUNA incident was handled (or not handled) by the Terra team. We requested their team to restore the network, burn the extra minted LUNA, and recover the UST peg. So far, we have not gotten any positive response, or much response at all,"
LUNA and CEO Do Kwon may soon be under investigation. As it became known, he was already a member of the team of another Basis Cash stablecoin, which also got scammed. In our opinion, the UST and LUNA teams have lost the trust of the crypto community and will no longer be able to restore the system to its previous values. With a probability of 90%, these projects will soon disappear from the field of cryptocurrency space.
How to save money and what to do with stablecoins USDT, USDC, BUSD etc.?
Immediately after the incident, some other stablecoins lost their peg to the dollar. Even the USDT stablecoin has fallen by almost 5% at the moment.
But a few hours later, the exchange rate returned to normal.
What to do, and what have we done?
Our team has divided its capital between different stablecoins, such as USDT, BUSD, USDC. These stablecoins are secured by real dollars and are much more reliable than stablecoins on an algorithmic basis. That is why we recommend that you divide your capital between different stablecoins and choose stablecoins that are backed by real fiat currencies.