Stablecoin TerraUSD Announces Recovery Plan After Sharp Plunge

ndtv.com:

TerraUSD, also known as 'UST', slipped below its 1:1 peg to the dollar this week.

TerraUSD, the so-called stablecoin which plunged in price this week, will be backed by reserves in future, its co-founder said in a tweet on Wednesday, in an attempt to steady the cryptocurrency by adjusting its complex pegging mechanism.

Stablecoins are digital tokens pegged to the value of traditional assets, such as the U.S. dollar. They are popular in times of turmoil in crypto markets and are a common medium of exchange, often used by traders to move funds around and speculate on other cryptocurrencies.

TerraUSD, also known as 'UST', slipped below its 1:1 peg to the dollar this week, roiling cryptocurrency markets already under pressure alongside tumbling stock markets. It dropped further to as low as 30 cents on Wednesday, before recovering to around 60 cents, according to price website Coingecko.

Prior to Monday, TerraUSD had a market cap of more than $18.5 billion and was the tenth-largest cryptocurrency. It has since lost more than half of that value, and is now the twelfth-largest cryptocurrency with a market cap hovering around $8.6 billion.

Unlike most other major stablecoins which are backed by other assets, TerraUSD's value is derived by complex algorithmic processes, linked to another paired token called Luna, which is free floating.

Luna slumped more than 94% on Wednesday to as low as 85 center before recovering to about $1.20.

Do Kwon, co-founder of the company behind the token, Terraform Labs, announced a "recovery plan" in a series of tweets, saying the company would seek additional outside funding and "rebuild" TerraUSD so that it is collateralised. That means it would be backed by reserves rather than relying on an algorithm