The price of the stablecoin TerraUSD has also declined significantly in the past few days amid heavy selling in the crypto market. Its co-founder plans to use the reserve to halt this decline. As of last week, TerraUSD had a market capitalization of over $18.5 billion. It has since dropped by more than half and stands at about $8.6 billion.
stablecoins There are cryptocurrencies that try to link their market price to a reserve asset such as gold or common currencies. These are more commonly used for digital transactions that involve converting virtual assets into real assets. USD Coin, Tether and Binance USD are some of the popular stablecoins, which are pegged to the US Dollar. Stablecoin, a rapidly growing version of crypto, has emerged as a major medium of exchange. It is often used by traders to remit funds. It is easy to exchange major stablecoins for bitcoin or other cryptocurrencies.
Other stablecoins have reserves in common assets but TerraUSD maintains it through an algorithm that controls supply and demand using Luna, another balancing token. TerraUSD, touted as an algorithmic stablecoin, broke its 1:1 link with the dollar on Tuesday. According to price website Coingecko, it fell to $0.30 on Wednesday. However, it later rose to around $0.60. Luna had broken over 94 percent on Wednesday and fell to $0.85. Later it increased to $1.20.
Kwon tweeted that TerraUSD Efforts will be made to get external funding to strengthen it again. This means that it will base the reserve instead of relying on an algorithm. Kwon also tried to reassure the investors of this stablecoin. “Short-term decline doesn’t determine where you can land,” he said. However, at the same time, he also called the price breakdown of TerraUSD a setback.