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Highlights
- TerraUSD drew criticism from crypto market analysts worldwide after its price had crashed to 30 cents on May 11.
- TerraUSD could be rising due to the announcement of a recovery plan from Do Kwon, co-founder of Terraform Labs.
- Unlike most stablecoins, TerraUSD is not backed by assets, but its value is governed through an algorithmic process.
The price of TerraUSD (UST) crypto rose over 40 per cent over the last 24 hours, and it was trading at US$ 0.608 per token at 8 AM EST, according to CoinMarketCap data. The one-day volume of the UST stablecoin climbed 1.4 per cent to US$ 5.5 billion, and its market capitalization increased to US$ 7.3 billion.
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TerraUSD drew criticism from crypto market analysts worldwide after its price had crashed to 30 cents on May 11. Stablecoins are supposed to maintain their value as they are pegged to the value of traditional assets like the US dollar.
When the turbulence increases in the markets, traders often flock to stablecoins as they can act as a medium of exchange to move funds around and speculate on other virtual currencies.
The 'so-called' UST stablecoin slipped below its 1:1 peg to the US dollar, and many blamed TerraUSD for the further fall of the cryptocurrency market.
At the time of writing, TerraUSD was recovering as its value increased over the previous day. Let's find out what it means for investors.
Why is TerraUSD rising?
Unlike most stablecoins, TerraUSD is not backed by assets, but its value is governed through an algorithmic process, and it is paired with another token named LUNA.
On May 11, LUNA crypto had slumped to over 90 per cent, and as of writing, it was down by 97 per cent and trading at US$ 0.03445.
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TerraUSD could be rising due to the announcement of a recovery plan from Do Kwon, co-founder of Terraform Labs, which is the company behind the stablecoin and LUNA crypto. In a series of tweets, Mr Kwon explained that Terraform Labs is seeking outside investment to rebuild the value of the UST coin.
The company will also introduce a formal proposal made by holders of the UST coin to increase the minting capacity or create new LUNA coins to absorb the stablecoin quickly.
Bottom line
If TerraUSD reaches its value, it could help investors regain their lost confidence. Many are already blaming the stablecoin for the fall of Bitcoin and altcoins.
On May 12, the crypto market crashed massively, and its market cap had reduced to US$ 1.2 trillion at 8 AM EST after it had decreased 13 per cent over the previous day.
As there's so much uncertainty in the crypto market, one should assess their risk capacity before buying any cryptocurrency.
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