This Article was last updated 2 days ago by Ola
Which Stablecoins are the Safest? #Stablecoins #Safest Welcome to TmZ Blog, here is the new story we have for you today:
The UST Depegging. It is by far, the biggest story in crypto right now. As we are preparing this for you it says 20 cents. And it’s supposed to say $1. UST broke its peg and we will have more details about that in the coming days.
Therefore, this issue led us to an important question. Which stablecoin is the most resistant to depegging? And a similar and related question, which stablecoin is the ‘safest’ to park your money? So if you still need to be holding stablecoins in your portfolio as we do, then you will want to see what we have to say about these leading stablecoins.
I want you to carefully listen to this. This is a video from May 2020 when Nevin Freeman, the co-founder of Reserve Protocol, warned us about Algorithmic Stablecoins like UST. And it seems his prophecy was right!
— Reserve El Lödgé (,) (🅡,🅡) (@ReserveCommmune) May 13, 2020
1) UST: The Cause of This Mess
UST is an algorithmic stablecoin on the Terra Luna network. And the algorithm manages the peg by minting or burning $1 of LUNA for UST or vice versa. We probably don’t need us to tell you about the amount of depeg that UST has gone through in this last week.
What happened is a huge sale of UST out in the marketplace. This reduced the price to under $1 temporarily, or so we thought. What’s supposed to happen next is first UST sells $1 of LUNA to mint $1 of UST. Then if something else happens, the Luna Foundation Guard had a reserve of both Bitcoin and Avalanche that they could sell to redeem $1 value in UST.
What happened is that the death spiral started as the value of all 4 assets (UST, LUNA, BTC, and AVAX) ALL declined in value together but especially LUNA. The mechanism says that you must mint LUNA when you burn UST so as we showed you earlier, supply skyrocketed while price tanked. Needless to say, it’s gone poorly for all parties involved. LUNA’s currently trading at less than 1 cent when it was over $100 just 2 weeks ago.