By Carjuan Cruz
Investing.com – The stablecoin or UST moves further away from its parity with the dollar, standing at 0.11 cents, while its ‘sister’ plummeted to $0, a drastic drop for a cryptocurrency that only in March reflected a price of $114 .
And the relationship of these assets is precisely what differentiated them in the cryptocurrency sector, promoting greater stability and less risk. TerraUSD or UST is supposed to be pegged one-to-one to the US dollar.
TerraUSD’s mechanism is to use Luna to maintain parity: When the price of TerraUSD falls below $1, holders can take them out of circulation, exchanging them for Luna. In this way, a lower demand for the first increases purchases of the second and, in turn, the price. But this financial articulation collapsed and lost parity.
This linkage occurs through an underlying algorithm or code, unlike other stablecoins, such as , which maintains parity with the dollar and provides even greater stability by having a backing in real assets, such as bonds.
But Tether also fell below $1, trading at 98 cents, and the nervousness spread to the rest of the sector. However, the currency regained parity, fueling the recovery of the , , , or , and most falling digital assets; they now reflect significant recoveries. However, Theter turned lower again, and is now at 0.99 cents.
The sector is attentive to the sustainability of the rebound of Bitcoin and the sector in general, and if it is again affected by the fall of these stablecoins.
“In such markets, it is normal to see rebounds amounting to 10-30%. These are typically bear market bounces, testing previous support levels as resistance,” Vijay Ayyar, vice president of corporate and international development at crypto trading firm Luno, explained in a CNBC report.