Everyone in the crypto ecosystem knows what is going on with the Terra protocol at the moment. A collection of factors has led to the most intense crash ever experienced by the LUNA token and the biggest downfall of a stablecoin.
Luna currently trades at $1.8 and seems to be crashing faster than even meme coins and scam projects. Surprisingly, UST is not left out. Its fall from $1 to less than $0.5 within a few days has astonished all in the crypto ecosystem. It seems the worst-case scenario has already played out as investors have collectively lost millions of dollars to the crash.
Will the stablecoin bounce back from the dust? Will investors put their trust again in the shaky project? Only time will tell, but we have at least three reasons to believe that UST will survive.
USDT Dumped Hard in 2018
In the early years of the most popular stablecoin, USDT suffered price instability and lost its peg to the dollar. Tether fell as low as $0.84 in 2018 when the token had an excessive supply. The stablecoin recovered and traded at 1:1 to the dollar that same year. Today, Tether is now the most valuable stablecoin.
Although, Tether is a collateralized stablecoin, which has quite a different tokenomics from UST, which is an algorithmic stable, the recovery of USDT proves that investors may regain their confidence in UST when the storm is over.
The LFG Loan
About two days ago, Luna Foundation Guard (LFG) revealed that a loan of $1.5 billion in Bitcoin would be lent to the Terra protocol to help strengthen its reserves and defend the value of the unstable stablecoin. Truth be told, the effect of the loan is yet to be seen at the moment; However, the Luna foundation is fighting hard to ensure UST regains its peg. We can be sure that the project is not abandoned, and Do Kwon and his crew will get as much financial support as possible to take UST back up.
UST’s High Annual Percentage Yield
An APY of 18.7% is more than attractive for investors. Although UST has lost its value and stability, many investors will still gain tangible profits from the token in the long run if stability is reclaimed. As long as UST trades above $0.82, yield farmers and lenders will be protected from losses on the protocol. The fear and uncertainty around Terra are only temporary, and more investors will join the project once again when the FUD is over.
