Terra’s UST stablecoin briefly lost its peg to the dollar earlier this morning amid heavy selling pressure and borrowing demand. A similar event occurred during the market crash in May 2021. A series of multi-million-dollar UST sales contributed to the volatility as the dollar-pegged altcoin slumped as low as $0.985.
Terra ecosystem faces pressure
UST, the first-tier Blockchain stablecoin, dropped below $1 early Sunday amid highly volatile market conditions. The decentralized coin, which aims to track the price of the US dollar using a dual token mechanism with Terra’s LUNA, spent some time below $0.985 before rebounding briefly. According to data from CoinGecko, it is trading at $0.996065 at the time of writing.
The shaking of reserves behind UST came after UST was hit by a string of multi-million dollar sales. On-chain data shows that one account traded approximately $85 million worth of UST for USDC on Curve Finance, while another user reportedly sold $108 million on Binance.
Altcoin revives with founder Do Kwon
As rumors circulate on Twitter and the market begins to show signs of panic, Terraform Labs CEO and self-styled “stablecoin master” Do Kwon is a possible “depeg” emerged to address their concerns.
Shortly after Kwon’s tweet, UST started to recover. On-chain data shows that one address simultaneously traded more than 57,000 Ethereums worth over $146 million for USDT, then traded the stablecoin for UST on Curve, possibly to rebalance the pool and bring its price closer to $1. The same address also transferred 20,000 Ethereum to Binance.
Interestingly, the chaos this weekend isn’t the first time UST has encountered problems. In May 2021, when the cryptocurrency market suffered its last brutal crash, the UST fell as low as $0.96. The incident has sparked fears that the stablecoin could one day go through a complete bank run, effectively killing Terra.
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