The Terra blockchain’s algorithmic stablecoin, UST leads the gainers’ chart for the week as it made its way back into the top 100 by market capitalization, ranking #65, with a market cap of $587 million as of the time of this writing.
The crypto market this week ended up being bearish with the market capitalization falling back below $900 billion as of the time of this writing. This is due to Bitcoin falling below the $20,000 trading zone again, as Fed Chair, Jerome Powell’s comment at a forum struck fears of further interest rate hikes in the future to tame the ever-increasing inflation rate.
Jerome Powell’s comments at the ECB forum got investors nervous during the week. When asked on Wednesday how the economy going to deal with a possible onslaught of interest rate hikes, he stated, “We are raising interest rates, and the aim of that is to slow growth down so that supply will have a chance to catch up. We hope that growth could still remain positive. But if you look at the strength of the economy, households are in very strong financial shape, they’ve still got a lot of excess savings – from forced saving of not being able to travel and things like that – and fiscal transfers. The same thing is true with business, with very low rates of default and lots of cash on the balance sheet. The labour market is also tremendously strong, still averaging very high job growth per month. Overall, the U.S. economy is in the position to withstand tighter monetary policy, we think.”
Why USTC is leading the chart
According to CoinMarketCap, more than 45% of the trading volume behind USTC and LUNC’s surprising price boom originated from KuCoin, a centralized exchange platform reportedly operating from Seychelles.
KuCoin’s is a crypto exchange and its lead backer is NEO Global Capital, a Singapore-based venture capital firm also exposed to financial platforms like Babel Finance and CoinFLEX. Both platforms have been facing liquidity troubles due to the ongoing crypto market decline.
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InvestmentU, a financial analytics group, in its June 28 note stated, “This isn’t a boom, bust and boom again cycle,” adding that LUNC could decline massively because “the tech behind it is dead.” They further added, “Its (LUNC) raison d’etre has been vanquished. And so has its price. While we can appreciate investors’ natural desires for outsized gains, there are better ways to go about it than this.”
The outlook appears the same for USTC, which has failed to perform its main function, i.e., providing clients a digital, stable version of the U.S. dollar.
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What you should know
- Terra’s $40-billion experiment to create a functional “algorithmic stablecoin” project has failed drastically following its collapse in May. Nonetheless, its native stablecoin TerraClassicUSD (USTC), earlier called TerraUSD (UST), has been thriving in the past week, with many associating the rally with that of a “dead man walking.”
- To recap, UST lost its U.S. dollar peg in May following mass withdrawals from Anchor Protocol, a lending and borrowing platform offering up to 20% yield to clients on their UST deposits. As of the time of this writing, the token is still trading far below its peg, trading at $0.056, down 94.4% from its supposed $1 peg, with many concluding that it was the end of the line for the project.
- However, USTC started recovering afterwards, insomuch that its value per token almost reached $0.10 on June 29. Simultaneously, its capitalization surged to $767 million according to data from CoinMarketCap. This comes despite USTC operating as an abandoned token after Terra launched a new blockchain with a new native asset LUNA 2.0, following a “hard fork” in May.
- Interestingly, LUNA 2.0’s older version, called LUNA, which now operates under the name “Terra Classic (LUNC)”, has also witnessed a spike in its market valuation like USTC, surging from around $160 million to $767 million in June. Amid the increased volatility related to Terra’s newly launched token LUNA 2.0, USTC has managed to register a surge of more than 400% over the past 7 days. USTC’s 24-hour trading volume has increased by 413% to stand at $83 million.