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TerraUST Plummets Causing Panic To Stablecoin Traders And Football Betters

TerraUST plummets a few times recently causing panic to stablecoin traders and football betters. Terra's UST, the third-largest stablecoin by market size, fell to $0.69 in trade on Monday. This is an all-time low, according to CoinMarketCap statistics, even after the Terra-supporting Luna Foundation Guard pressed a $1.5 billion loan to prop up the currency. On Coinbase, the stated price fell as low as $0.65.

Of course, this awful news will affect all stablecoin dealers worldwide. Football betting has been booming these past few years and this event would definitely change a lot of things. If you are a crypto football better, this news is extremely important. But, if you're brand new to this, let's go discuss a bit what stablecoins are.

What Is A Stablecoin?

Different logos of stablecoins
Different logos of stablecoins

A stablecoin is a cryptocurrency that is backed by a reserve asset and strives to guarantee price stability. Stablecoins have grown in popularity because they aim to deliver the best of both worlds: rapid processing and security or privacy of cryptocurrency payments, as well as the stable values of fiat currencies. Although Bitcoin (BTCUSD) is the most widely used cryptocurrency, its value is extremely volatile. For example, it increased from around $5,000 in March 2020 to over $65,000 in April 2021 before dropping by more than half to around $30,000 in June 2021.

Even intraday price swings may be severe, with the cryptocurrency frequently soaring more than 10% in each direction in a matter of hours. As a result, Bitcoin and other popular cryptocurrencies are unsuitable for general public use. The value of a currency should be largely stable throughout time, and it should function as a medium of exchange and storage of value. Users will not use it if they are unsure of its purchasing power.

TerraUSD (UST)

The official logo of the stablecoin TerraUST
The official logo of the stablecoin TerraUST

TerraUSD (or UST) is a decentralized, scalable, algorithmic stablecoin with a number of features. It is well renowned for its monetary policy, which is basically indefinitely expandable. The stablecoin has evolved into the ideal scalable stablecoin since its debut in 2020. As the demand for stablecoins increased, it became clear that the vast majority of them are not actually scalable. As a result, a stablecoin such as TerraUSD was needed. It is likely to compete with DAI, the market leader in stablecoins. It offers a scalable experience to the DeFi sector whereas many traditional chains have major growth issues.

TerraUSD is made possible by a few simple laws and restrictions. Scalability is one of the interchain capabilities. TerraUSD makes advantage of existing technologies and makes modifications to provide the greatest user experience possible. Because UST is an algorithmic stablecoin, the cost of minting equals the face value. It holds Terra's native cryptocurrency, LUNA. In other words, just $1 of Terra's LUNA token is burned to create one TerraUSD. The stablecoin can also earn a stable yield by utilizing the "Anchor" yield service, which is a first for stablecoins. TerraUSD also allows for the merging and activation of blockchain ecosystems using the Dropship protocol.

Dropship enables USD trading between blockchains and DeFi systems. This protocol allows for scalability. It also maintains UST value stability because TerraUSD value is determined by LUNA demand and supply. Miners must stake the native Terra LUNA coin in order to mine Terra transactions. To mine the coin, Terra Network validators must stake LUNA. These validators will serve as the dollar pricing oracles for LUNA. Through UST transactions, they gain UST tokens. The Anchor protocol, which is a loan and saving system, guarantees a 20% return on UST investments. However, MakerDAO's DAI returns 13% and Coinbase's USDC returns 14%. It is also possible to borrow LUNA from Anchor. Bonded LUNA (bLuna), a staked variation of LUNA that pays interest, will be used to secure loans. Terra intends to accept native coins from other Layer0 networks as collateral in the near future.

How UST Works

TerraUSD (UST) is a stablecoin created to benefit both users and the community. It is used in a variety of services and products. It is sometimes combined with LUNA and other times used alone. TerraUSD's interchain utilization and great scalability. Because of UST's unique minting methodology, several DeFi methods can use the money without sacrificing scalability. TerraUSD can be used to make payments in e-wallets such as Chai and MemePay.

UST has delighted Terra users in the yield or interest-bearing arena. The Terra platform's interest or profit is based on UST block rewards from PoS networks. Dropship, an innovative bridging tool, enables UST to easily migrate between blockchains. DApps also make advantage of UST. Mirror protocol, for example, uses UST as a fundamental asset to build fungible "synthetic assets" that track real-life asset prices in real-time.

Terra's Downfall

Graph showing Terra's UST value fluctuation
Graph showing Terra's UST value fluctuation

Terra is a blockchain network with its own stablecoin, UST, which is denominated in US dollars. Unlike USDC and Tether, which are nominally backed by cash and bank assets, the UST stablecoin is designed to maintain 1:1 parity with the US dollar through an algorithmic relationship with Terra's native asset, LUNA. Minting LUNA necessitates the burning of UST, and arbitrage opportunities are intended to keep UST as near to $1 as possible.

However on Monday, terraUSD (UST), which burns and mints its sister token LUNA to absorb price shocks, lost its dollar peg for the second time in three days. UST, a popular stablecoin, fell below $0.85 late Monday. The Fed's newest "Financial Stability Report" warned that unexpected, urgent redemptions of stablecoins – crypto tokens tied to another asset like the dollar – are similar to money-market fund runs.

The study, which was updated in November, is issued biannually by the Fed to analyze current threats to the US financial system's stability. According to the report, these vulnerabilities may be exacerbated by a lack of transparency regarding the riskiness and liquidity of assets backing stablecoins.

Reaction Of Traders And Football Betters

When TerraUSD departed from its peg, some traders panicked and sold their assets. Others began selling ether and buying TerraUSD in order to reestablish the peg, putting downward pressure on the dollar value of the second-largest cryptocurrency by market capitalization. Mr. Solot went on to say that several traders sold bitcoin over the weekend, expecting the platform would liquidate its bitcoin holdings to support the peg. Bitcoin fell 10% Monday to more than $31,076 after a global selloff in cryptocurrency markets.

TerraUSD was trading around 80 cents on Monday evening, according to CoinMarketCap, after touching a low of 69 cents earlier. According to CoinMarketCap data, panic selling also hit the related Luna cryptocurrency, which plunged 50% from Sunday to Monday, wiping off more than $10 billion in market value. The Luna Foundation Guard, a Terra-supporting NGO, said that it voted to fund TerraUSD by lending $750 million in bitcoin to trading businesses in order to keep the stablecoin pegged and another 750 million in TerraUSD in order to acquire more bitcoin.

Do Kwon, the TerraUSD's South Korean developer, co-founded the Luna Foundation Guard this year, announcing that it would hold a substantial bitcoin reserve money that it would spend lavishly if required to protect the stablecoin's peg. His company, Terraform Labs, has donated several billion dollars in cryptocurrencies to the NGO.

Mr. Kwon said in a tweet on Monday,

Deploying more capital—steady lads.

According to Mr. Solot of Tagus Capital, the selloff could have been caused by someone or a group of persons attempting to break the peg. Regardless of the cause, he does not expect TerraUSD to recover to $1 immediately because a queue of sell orders is still pending. He also added, he doesn't think this peg is going to come back soon, there’s so much TerraUSD still to come out of the system, and that’s going to continue putting pressure on the peg.

Regardless of what is going on now, you may still have high hopes for stablecoins. Though most stablecoins are unpredictable, a lot of football betters still continue to bet using cryptos. But you may wonder about the best crypto sports betting sites. Here is the list.

Best Crypto Sports Betting Sites

  • BC.Game 4.89
  • Cloudbet 4.85
  • Sportsbet.io 4.77
  • N1Bet 4.73
  • Stake 4.92

Conclusion

Stablecoin is a thriving investment globally. If you want to get into this investment for football betting purposes, you need to do your research and set your expectations.

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