TerraUSD struggling and controversial algorithmic stable coin plunged on Wednesday as crypto markets await a rescue led by primary backer Do Kwon, according to Bloomberg.
The token plunged from its intended 1-to-1 peg to the US dollar to trade at around 35 cents this morning.
TerraUSD, or UST, is the biggest algorithmic stablecoin by market value.
The toke lost its peg ratio to US dollar falling to about 99 cents over the weekend. Selling waved followed and by Monday evening UST had hit all time low of 60 cents.
On Tuesday, following an earlier tweet from Kwon that he was “close to announcing a recovery plan,” the token traded off the lows and rallied to a high of around 94 cents.
Online stable coins like Tether’s USDT and Circle’s USDC which are backed by dollar, algorithmic tokens are designed to maintain their peg (and investor confidence) through a combination of mathematical equations and active trading.
In the case of UST, investors can exchange one unit of the token, no matter what price it’s currently trading at, for $1 worth of Luna. The embedded arbitrage trade helps keep UST at or close to $1, or so the theory goes.
