The Terra network’s native algorithmic stablecoin TerraUSD (UST) has plummeted more than 45% over the past 24 hours. 

On Wednesday morning it plunged as low as $0.2998, according to data from CoinMarketCap. It’s currently trading around $0.50 per coin, far below its $1 peg. In terms of market value, the stablecoin has shed more than $11 billion since May 9, 2022. 

Today, UST’s market cap is just over $7 billion, making it the fifth-largest stablecoin on the market (a far cry from third place, which it hit back in April).  

UST is one of two key tokens within the Terra network ecosystem.

Rather than being backed by traditional assets (i.e. cash, treasuries, etc) or even cryptocurrencies, Terra’s stablecoin had attempted to maintain its peg using a mint-and-burn mechanism in tandem with LUNA, Terra’s native governance and staking token. 

In this arrangement, investors could always swap 1 UST for $1 of LUNA (and, in swapping, destroy that UST, removing it from circulation). Thus, whenever UST fell below its $1 peg, savvy arbitragers could buy the discounted UST and swap it for $1, nabbing a neat profit. 

The buying pressure on UST was expected to re-peg the wavering stablecoin. 

This past week, however, this mechanism has deteriorated. 

UST’s traumatic week

Though today marks the lowest price point UST has fallen to, the stablecoin has been battling since Sunday to recover its $1 peg. At that time, the stablecoin dropped to $0.985. 

The event was nonetheless enough to incite panic in the market, dragging LUNA down 10% at that time. 

Today, though,…

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