UST

A 'stable' coin lost its peg over the weekend and pledged $1.5 billion in Bitcoin trying to stabilize. Here's how the algorithmic stablecoin was supposed to ...

As the UST stablecoin dropped, it brought its sister coin down with it. It (theoretically) maintains its dollar peg through an algorithm that encourages traders to take advantage of any price changes in the stablecoin. But he stops short of calling UST stable. The system relies on traders burning or creating tokens for profit to maintain its peg to the U.S. dollar. But after days of triage by LFG, the UST stablecoin still hasn’t regained its peg. Because there is less UST changing digital hands, the price should theoretically go up toward $1 again, maintaining the peg. This process works through UST’s pairing with its sister cryptocurrency, Luna. Every time a UST token is minted, the equivalent of $1 in Luna is burned, and vice versa. The idea behind stablecoins is that investors use them as a “safe” cryptocurrency asset. Lacking reserves puts UST in particular at the will of various assumptions, Clements said, including those that there will be ongoing interest in the use cases of UST and that there will always be enough traders with accurate price information taking advantage of when UST falls below a dollar to keep the stablecoin in check. On Saturday, the UST stablecoin lost its peg to the U.S. dollar and then again on Monday. As of Tuesday afternoon, the stablecoin was still off its dollar peg by about 10 cents. If the price of UST exceeds $1, traders are incentivized to burn Luna in exchange for a dollar in UST, which increases its supply and theoretically will eventually drop the price back to $1. They are tied to the price of a fiat currency like the U.S. dollar, so in theory, one stablecoin pegged to the dollar is always worth at least $1.