Another 'algorithmic' stablecoin has fallen below its $1 peg — but experts say it's not 'Terra 2.0'

cnbc.com:

A controversial stablecoin launched just before the collapse of a similar token called terraUSD is struggling to maintain its peg to the U.S. dollar.

USDD, a so-called «algorithmic» stablecoin that's meant to always be worth $1, plunged to as low as 93 cents on Sunday. The coin's creator has amassed a reserve of bitcoin and other digital tokens worth close to $2 billion to provide a buffer in case investors flee en masse.

The situation has led to fears that USDD may suffer the same fate as terraUSD, or UST, the wrecked so-called stablecoin that formed part of an experiment called Terra. UST's meltdown triggered a wider sell-off in cryptocurrencies, which has been exacerbated in recent weeks by a growing liquidity crisis in the market.

Dustin Teander, a research analyst at crypto data firm Messari, said USDD's «de-peg» was being driven by volatility in the crypto market.

«When people are in need of funds during volatile periods, they need to quickly exit other positions,» he said.

«With sizable exits from USDD, as well as speculative selling, the result is deviation from the peg in the short term.»

But despite concerns over a repeat of the Terra saga, experts say this is unlikely to be the case, since USDD is much smaller in size and has seen little uptake from crypto investors.

USDD was launched in early May, days before UST began tumbling below $1. For the past week, it has consistently traded below its intended dollar peg.

Instead of sitting on piles of cash and other cash-like assets, USDD runs a complex algorithm — combined with a related token called tron — to maintain a one-to-one peg to the greenback.

If that sounds familiar, it's because Terra's UST operated in much the same way, creating and destroying units of