The balancing algorithm between Terra (Luna) and UST fluctuated wildly, causing both
The collapse of UST and Luna caused investors to lose billions of dollars, and affected a series of other cryptocurrencies. Many people question the claims of cryptocurrency developers that they can build a new form of finance, unaffected by uncertainties from banks in the traditional financial world.
What are stablecoins?
Cryptocurrencies like Bitcoin are volatile digital assets that fluctuate wildly in a very short time just by a tweet from Tesla CEO Elon Musk.
Stablecoins are designed to mitigate that risk. They are digital currencies that are developed on the blockchain and have a stable value, because they are pegged to the value of fiat currencies, such as USD or Euro. In theory, a stablecoin should be worth the equivalent of a dollar, regardless of how other cryptocurrencies fluctuate.
Stablecoins have become a staple of the crypto ecosystem over the past two years, with traders and investors amassing around $180 billion in stablecoins as of mid-May.