The algorithmic decentralized stablecoin modeled after Terra’s now-defunct UST lost its dollar peg last month as the collapse of FTX dented investor confidence in digital assets.

The Tron network’s algorithmic stablecoin decentralized USD’s (USDD) search for a stable U.S. dollar peg continues even as the broader crypto market holds steady in the face of widening FTX contagion.

The stablecoin championed by Tron’s founder Justin Sun and managed by Tron’s decentralized autonomous organization (DAO) fell to $0.9695 early Monday, hitting the lowest since June 22, according to data source Coingecko.

USDD deviated from its 1:1 dollar last month as the collapse of cryptocurrency exchange FTX, formerly the world’s third largest, dented investor confidence in digital assets. Other leading stablecoins like tether (USDT) wobbled following the FTX debacle, but quickly regained their peg.

USDD’s prolonged de-pegging is accompanied by a steady increase in the stablecoin’s dominance rate in the USDD/3CRV liquidity pool based on the decentralized exchange Curve.

At press time, USDD accounted for 86% of the pool’s total liquidity of $34.5 million, up from 80% seen on Nov. 10. The heavy imbalance suggests users are increasingly swapping USDD for the pool’s other components – DAI, USDC and USDT.

In an attempt to calm market nerves, Justin Sun announced on Twitter that he is deploying more capital to defend USDD while stressing that the algorithmic stablecoin has a collateral ratio of 200%.

USDD’s inability to regain the peg has Crypto Twitter wondering whether the dollar-pegged coin modeled after Terra’s now-defunct algorithmic stablecoin, UST, is the next to go down.

UST crashed in May, destroying billions in investor wealth. However, before the crash, UST’s market capitalization was $18 billion – or 18 times bigger than UST’s going market value of less than $1 billion. In other words, the fallout from a potential USDD collapse might be less severe than UST.

The post Tron’s USDD Stablecoin Falls to Under $0.97, Lowest Level Since June appeared first on Crypto Insider.

Kwon’s Terra ecosystem collapsed in May with $60 billion in value imploding, after which he faced charges of violating capital markets laws in South Korea

The co-founder of Terraform Labs, Do Kwon, is rumored to have left Singapore for Dubai, rumors which may have some validity, Bloomberg reported on Friday.

On Thursday, there were reports that Kwon had left Singapore last month and landed in Dubai. According to Bloomberg, South Korean prosecutors have said that the report was “not false.”

The Terra ecosystem imploded in May evaporating $60 billion in value, after which Kwon faced charges of violating capital markets laws in South Korea.

Having departed his native country for Singapore, Kwon denied reports that he was on the run, despite Interpol issuing a Red Notice for his arrest. He claimed he had moved there before the collapse of the Terra ecosystem.

Terra’s collapse led to far-reaching damage across the crypto industry with reports of some investors losing their life savings.

The post S. Korean Prosecutors Say Reports of Do Kwon’s Stopover in Dubai ‘Not False’: Bloomberg appeared first on Crypto Insider.

While tether has passed the market’s stress test with a return to normalcy, concerns about its reserves will linger, one trader said.

Tether (USDT), a stablecoin meant to be worth a dollar, has found stability for the first time in over two months.

The world’s largest stablecoin by market value regained its dollar peg on July 20 and has remained steady since then, the first such instance since the collapse of Terra’s algorithmic stablecoin TerraUSD or UST (now TerraClassicUSD) in the second week of May.

Terra’s UST, the-then third largest stablecoin in the world, tanked on May 12, spurring panic selling in other dollar-pegged cryptocurrencies. Tether’s peg broke and fell as low as $0.92 on some exchanges following UST’s crash and averaged about $0.99 in June.

Tether’s market capitalization has declined by $16 billion to $65 billion in two months, a sign of large redemptions by holders. This means that the company behind USDT, Tether Ltd, honored billions of dollars worth of redemptions following UST’s meltdown. Tether Ltd has long been criticized for the lack of transparency about the nature of assets backing the stablecoin.

In other words, tether has passed the market’s stress test, withstanding redemptions in volatile conditions and eventually reclaiming the peg. “The past two months have definitely been a stress test for stablecoins following the collapse of UST and sharp contraction in USDT’s market cap,” Clara Medalie, research director at Kaiko, said. “Tether proved it’s ability to process billions in redemptions, despite lingering questions over the makeup of its reserves.”

It remains to be seen if tether’s recent resilience bolsters investor confidence in the stablecoin, and trader and analyst Alex Kruger is still skeptical about the stablecoin’s resilience. Tether is heavily used in the bitcoin (BTC) market and decentralized finance (DeFi).

“Tether has once again passed the stress test under extreme market conditions,” Kruger said. “However, I do not foresee tether FUD to diminish in any significant way until there is stablecoin issuer regulation in place and Tether adheres to it (such regulation does not yet exist).”

Tether Ltd has long claimed that the value of its stablecoin is always 100% backed by assets to ensure the stability of the 1:1 dollar peg. In May, Tether Ltd published an attestation of holdings by independent accountants MHA Cayman, which showed the company held $39.2 billion in Treasuries, had $4.1 billion in bank deposits, $6.7 billion in money market funds and $3.1 billion in secured loans. A potential loss of confidence in tether will most likely result in a severe liquidity shock to the broader crypto market, according to JPMorgan (JPM).

While tether is supposedly fully collateralized, UST, is an algorithmic stablecoin backed by an endogenous token LUNA, whose value is tied to the stablecoin itself. The setup makes UST and algorithmic stablecoins vulnerable to bank runs, like the one seen in May.

While tether is supposedly fully collateralized, UST, is an algorithmic stablecoin backed by an endogenous token LUNA, whose value is tied to the stablecoin itself. The setup makes UST and algorithmic stablecoins vulnerable to bank runs, like the one seen in May.

The post Tether Finds Stable Dollar Peg After Terra’s Collapse appeared first on Crypto Insider.

Over $20 million had been earmarked to help projects making the move.

More than 48 projects previously on the Terra network have begun migrating to Polygon almost two months after the Terra ecosystem collapsed following the implosion of terraUSD (UST).

“Terra projects have begun migration,” Polygon Studios CEO Ryan Wyatt said in a tweet early Monday. “Over 48 projects and counting… including OnePlanet_NFT, an exclusive 0xPolygon marketplace, and DerbyStars_HQ.”

In May, Polygon Studios announced a multimillion-dollar fund to assist Terra projects looking to switch. It was ready to pay as much as “$20 million, roughly” to help Terra teams migrate to its own blockchain to continue building products.

“For any project which wants to come from Terra to Polygon, we will be happy to provide them both financial assistance as well as technical assistance,” a spokesperson for the Polygon ecosystem told CoinDesk at the time. “We’ll provide them developers and everything.”

Developers behind other blockchain networks also courted Terra projects, among them Kadena, Cosmos and Avalanche, as previously reported.

UST, the Terra ecosystem’s algorithmic stablecoin that was designed to maintain its value by minting or burning exactly $1 worth of luna for 1 UST, fell to under 10 cents in May after losing its peg following investor outflows.

Excessive minting of luna to try and bring UST back to its peg caused prices of the governance token to fall by as much as 99.7%, while Terra-based DeFi applications saw over $28 billion in outflows.

The post Terra Projects Begin Moving to Polygon Months After UST Debacle appeared first on Crypto Insider.

The collapse of the Terra network was due to prioritization of mass adoption over price stability, the bank said.

Concerns of a so-called crypto winter are unfounded, according to Bank of America (BAC), the second-largest U.S. bank.

Investors wondering why digital assets are not outperforming traditional ones should be aware that the cryptocurrency ecosystem is an “emerging tech asset class and the tokens that power the ecosystem trade like high growth, speculative risk assets,” analysts led by Alkesh Shah wrote in a May 17 note.

Digital assets are faced with similar headwinds to traditional assets, including: surging inflation, higher interest rates and the increased risk of a recession, the note said.

Worries of contagion risk within the crypto ecosystem and spillover effects in traditional financial markets due to the collapse of algorithmic stablecoin terraUSD (UST) are also unfounded, the bank said, though the slump probably contributed to recent volatility in bitcoin (BTC).

UST is not backed by traditional assets and the loss of its peg shows the durability of the wider stablecoin market, because the largest stablecoins maintained theirs, it added.

Bank of America says the collapse of the Terra network was due to its prioritization of UST’s adoption over its price stability, and while it is not positive about UST revival plans, it still sees the potential for a successful algorithmic stablecoin.

Stablecoin regulation is expected to lead to increased disclosures for algorithmic stablecoins, but an outright ban seems unlikely, the note said.

Banning algorithmic stablecoins would be “premature” and could slow the ecosystem’s growth, it added.

The post BofA Says Crypto Winter, Contagion Risk Concerns Are Overdone appeared first on Crypto Insider.

Recent weakness in bitcoin and equities looks contemporaneous and doesn’t show any lag or lead effect, the bank’s analysts said.

Cryptocurrency markets have been under pressure in the past week following the collapse of the third-largest stablecoin, terraUSD (UST), Citi said in a note published May 13.

The fall in crypto markets took place against the backdrop of already weak risk assets, and Citi says it does not expect a broader economic fallout because the digital-asset market is still relatively small compared with traditional asset classes and the make-up of household wealth.

The analysts said they saw no apparent “lead effect” from bitcoin to S&P 500 index futures. The recent weakness in bitcoin and equities appears “contemporaneous,” according to the report. Still, given the existing poor sentiment in equities, the fall in crypto markets doesn’t help, it said.

Bitcoin is expected to remain highly volatile, and is influenced by many factors including potential regulatory action, the report added, noting that the BTC price has declined close to “production cost and spot adoption model implied valuations.”

The bank sees production costs as a floor because below these levels it is “less economical for mining, which may lead to a decline in hash rates, and an adjustment in algorithm difficulty to keep the bitcoin mining reward rate constant.”

Citi says regulatory interest in stablecoins is likely to increase after the UST depegging.

Morgan Stanley said in a report Thursday that clients were asking whether the large drop in crypto prices and the depegging of stablecoins poses a “more systematic risk for broader financial markets.”

The post Citi Says Fallout From Terra Collapse Unlikely to Hit Wider Financial System appeared first on Crypto Insider.

The announcement comes after reports that over a billion dollars of Terra’s bitcoin reserves are unaccounted for.

The Luna Foundation Guard (LFG), official stewards of Terra’s bitcoin reserves, released a statement on Monday documenting how it disbursed millions of dollars worth of crypto in its failed attempt to maintain the peg of stablecoin terraUSD (UST).

In the statement, LFG notes that its BTC reserves have depleted almost entirely — from around 80,000 BTC to about 300. The remaining assets, which mostly comprise of the crashed UST and LUNA tokens, will apparently be used to compensate investors.

In one of the calamitous events in crypto memory, the $40 billion Terra ecosystem collapsed last week when the UST stablecoin — which is supposed to be worth $1 — dropped below 20 cents. The LUNA token, which is designed to serve as a sort of shock absorber for UST’s “algorithmic” dollar-pegging mechanism, crashed from $80 to below $0.002.

In a tweet on Monday, LFG said it sold off most of the BTC in its reserves for UST as Terra’s ecosystem was beginning to collapse early last week.

LFG said it transferred over 50,000 BTC “to trade with a counterparty” on May 8, as the UST price was originally starting to slump.

It said the funds were used for “directly executing on-chain swaps and transferring $BTC to a counterparty to enable them to enter trades with the Foundation in large size & on short notice.”

On May 12, LFG says another 30,000 BTC from its reserves were sold off by Terraform Labs (TFL), the original company behind Terra, “in a last ditch effort to defend the peg.”

LFG confirmed the remainder of its reserves, which once totalled over $3 billion, have sunk almost completely as a result of the unsuccessful effort to defend UST.

LFG says these funds will be used “to compensate remaining users of UST, smallest holders first.”

Monday’s statement from LFG comes amid criticism that Terra’s reserve funds — which were supposed to belong to the “decentralized” Terra community — were handled with a lack of transparency by Terra’s centralized leaders and investors.

It also comes after leading figures in the blockchain space, including Ethereum Founder Vitalik Buterin, have called for Terra to compensate smaller holders of UST and LUNA before its largest investors.

UST’s price plummeted further in response to Monday’s announcement — from $0.15 to $0.07.

The post Luna Foundation Guard Left With 313 Bitcoin After UST Crash appeared first on Crypto Insider.

Terra believes that decreasing the amount of UST in circulation, while increasing the amount of available LUNA, is the easiest way to return the UST to a peg.

Terra believes that the downwards pressure on UST’s peg is diluting Luna, impeding recovery for both while creating an excess of UST, and the way to solve this is through burning UST and increasing the available pool of Luna.

“The primary obstacle is expelling the bad debt from UST circulation at a clip fast enough for the system to restore the health of on-chain spreads,” said Terra in a Tweet.

Algorithmic stablecoins like UST are supposed to be automatically pegged to the price of another currency. As explained in a prior CoinDesk learn article, traders can swap LUNA for UST at $1 regardless of the market price because the algorithms in the backend will manage the supply of LUNA creating enough scarcity to justify the $1.

A token burn refers to taking crypto out of circulation on the blockchain. It can be thought of as a deflationary event, because it would increase the value of the remaining blockchain. For token holders, it would be a similar event to a share buyback.

In a proposal put forward to token holders, Terra said that it wants to burn the nearly 1 billion UST (roughly $690 million) in the community pool while increasing the Base Pool of LUNA available to 100 million which in turn increases minting capacity to over $1 billion. This will help expedite the outflows of UST from the system, and thus pushing it back closer to its peg, while pushing down the price of Luna.

“Currently, the burning of UST is too slow to keep pace with the demand for excess UST to exit the system, which is hindered by the BasePool size,” reads the proposal. “Eliminating a significant chunk of the excess UST supply at once will alleviate much of the peg pressure on UST.”

Some comments on the proposal asked if this happened because of a bug in Terra’s coding, or if it was also a product of a broader market downturn driven by the decline in bitcoin’s price.

Validators of the network are able to vote for this proposal. According to a vote tracker, the Yes side has received 50.47% of the vote while the abstain side has 49.1%. 87.8% of eligible voters have already cast a ballot, and the pass threshold is 50%.

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It becomes the sixth blockchain to be supported by the popular data platform.

As Terra’s influence in decentralized finance (DeFi) grows, traders are now equipped with new tools to track it.

Popular wallet profiler and analytics platform Nansen announced on Thursday that it has expanded its coverage to Terra, now the sixth blockchain the service analyzes.

The coverage comes at a time when Terra is emerging as a DeFi powerhouse and its native token, LUNA, is bucking wider market trends.

Terra is currently the second-largest chain in terms of total value locked (TVL) at $25.6 billion, comfortably outstripping Binance Smart Chain’s $11.9 billion. Likewise, LUNA is up 65% on the month, while ETH has fallen by 5%.

Part of the popularity of the chain is attributable to its high performance. Per a press release provided to CoinDesk, “research from Nansen shows that the total number of transactions on Terra hover around 50% of Ethereum’s total transactions while gas fees paid are between 0.2%–0.6% of that paid on Ethereum.”

However, detractors say that much of the volume that Terra has attracted is due to Anchor, a stablecoin minting protocol that yields over 19% to depositors.

The protocol is often referred to as pyramidal or “ponzinomic” in nature, and high-profile Twitter personalities have been engaging in bets about the price of LUNA in part as a proxy for Anchor’s success.

The post Nansen Adds Terra for On-Chain Analytics as Home of LUNA Grows as DeFi Hub appeared first on Crypto Insider.