Stablecoins Unsettled After Luna Shock and UST

 Stablecoins shook in value after the two tokens Luna and UST suddenly plunged.

According to CoinMarketCap, the total capitalization of stablecoins is around $170 billion, a fraction of the total $1.2 trillion in value of the crypto market. However, they play an extremely important role for crypto traders, as intermediaries to buy tokens on the exchange.

In the latest 6-month financial stability report on May 10, the US Federal Reserve (FED) warned that stablecoins are increasingly used by more people. As of 2018, the coin is also being used more in international trade and as a way to avoid capital controls, according to Joseph Edwards, head of financial strategy at crypto firm Solrise.

Currently, there are two main types of stablecoins: those backed by collateral assets like fiat money, bonds, commercial paper, or even other crypto tokens. Tether (USDT), USD Coin (USDC) or Binance USD (BUSD) fall into this category.

The latter builds a "decentralized" algorithm, typically UST. This stablecoin is not held in reserve, rather its value is maintained by a complex mechanism that involves swapping UST coins with a freely floating cryptocurreny called Luna to control the supply.
Previous Post Next Post