The rapidly growing popularity of TerraUSD Stablecoin comes with risks due to its reliance on the dollar-binding algorithm.
“It is fun and a game if you are a $5 billion or $10 billion stablecoin,” Tether Chief Technology Officer Paolo Ardoino said in an interview with CoinDesk at the Paris Blockchain Week Summit, but that can change the stablecoin market cap. that can increase
Currently, UST is the third largest stablecoin on the market after Tether’s USDT and Circle’s USDC (USDC), which is still significantly larger in terms of market capitalization. Fast from $180 million in early 2021 to a market cap of over $17 billion as of April 18 this year.
UST maintains $1 value using smart contract based algorithm to keep UST price $1 by permanently minting LUNA tokens to mint UST tokens.
Ardoino sees that “if you have liquidation [ด้วยอัลกอริธึม stablecoin ขนาด UST] With this market, you can still deal with it. But imagine if you had an $80 billion or $100 billion stablecoin like tether, which [ส่วนใหญ่] backed by digital assets It is very difficult to predict what will happen and whether there will be enough liquidity.”
severe market volatility may pose a significant threat to UST, while another concern may arise from theMore than 67% of UST demand Derived from Anchor Protocol
The Anchor protocol, a high yield 19.5% Terra blockchain-based savings protocol, and Terra need to maintain that yield, if not, UST holders may quickly sell their tokens. Increase the risk that there will be insufficient liquidity in the market for everyone to leave the market at the same time. According to some analysts and tradersworry
But UST isn’t the only stablecoin that has caught the attention of investors, with Ardoino’s company Tether, the largest stablecoin issuer by market cap. It has also been questioned whether there will be enough margin to support USDT to hold the price at 1:1 as well.
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