Are Alameda and Leading Crypto Venture Capitals Lining $2 Billion to “bailout” Terra’s UST?

On Tuesday, May 10^th, the VP of research at TheBlock shared reports concerning Terra’s UST and expected plans to bail out the crypto protocol. Larry Cermak stated that rumors have been flying around about Alameda and Jump’s plans to provide $2 billion to rescue the protocol from its current mess.

There is a rumor spreading about Jump, Alameda, etc. providing another $2B to “bail out” UST. Whether this rumor is true or not, it makes perfect sense for them to spread. The biggest question here is, even if they can get it to $1 by some miracle, the trust is irreversibly gone
— Larry Cermak (@lawmaster) May 10, 2022

Larry further stated that both firms would find it daunting to raise UST back to its original value of $1. Even if they succeed in “performing the miracle,” Terra protocol has lost its trust, added Larry. The seasoned crypto researcher believes that investors will turn away from the algorithmic stablecoin after the recent crash of Terra’s ecosystem.

Terra’s UST has been very unstable for some days now, ranging from $0.0.68 to $0.98. The native token of the Terra ecosystem, LUNA, has also experienced its most recent price crash since its launch. LUNA, which traded above $100 last month, crashed to as low as $26 yesterday and currently trades slightly above $30.

Will UST Recover from its Crash?

Larry Cermak has lost faith in the stablecoin, which isn’t stable in the meantime, and believes the only way to retain its stability is to change the framework on which the token is built. Rather than raising more funding, Terra’s UST can be revamped from an algorithmic stablecoin to a collateralized stablecoin like USDT and USDC.

Meanwhile, Jake Chervinsky, an investment lawyer, recalled that many critics were excited some years back when USDT lost its peg and traded below $0.85. According to Jake, it will be better for Luna’s community members to wait for reality to play out.

Admittedly, UST and USDT are two different kinds of stablecoins in different situations. UST is algorithmic, while USDT is collateralized. However, the crypto ecosystem has seen stablecoins recover from intense volatility and the past.

With UST bouncing back and trading above $0.9 again, it will be less ambitious if investors hope for the protocol’s value to regain stability soon. More so, more funds injected into the Terra ecosystem can go a long way in ensuring stability for the token.