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The stablecoin USTC, which seemed to have been “buried deep” underground after the collapse of the Terra ecosystem, suddenly grew by 800% in just the past few days.
Since the USTC (old UST) event lost its peg to the US dollar in May, Terra’s stablecoin token has continuously bottomed and maintained trading at $0.005 – $0.008 throughout June 2022. This is a consequence of the mass withdrawals of users from Anchor Protocol, a lending and borrowing platform that offers up to 20% interest to customers who deposit UST into the platform.
See also: The fall of the Terra . family
Thought that was the end of Terra’s stablecoin, suddenly in the last days of June, USTC’s recovery momentum started to return and sometimes hit $0.089 on June 29, 2022. At the same time, capitalization spiked from $65 million to $767 million in the same time period (according to data from CoinMarketCap).
This happens despite USTC being abandoned after Terra launches new blockchain with new native assets LUNA 2.0 passed “hard fork” in May. Not stopping there, the older version of LUNA 2.0, called LUNA, now operating as Terra Classic (LUNC), also saw a market valuation jump similar to USTC, up from $160 million. up to 767 million dollars.
According to CoinMarketCap, more than 45% of the trading volume when the USTC and LUNC prices exploded originated from KuCoin, a centralized exchange platform that is said to operate from the Seychelles. KuCoin’s main backer NEO Global Capital (a Singapore-based venture capital firm) also has exposure to financial platforms such as Babel Finance and CoinFLEX. Both are facing liquidity troubles due to the continuous decline of the cryptocurrency market.
The reasons for this spike are not clear, but many experts attribute the event to the inflating of whales in the cryptocurrency market. InvestmentU, a financial analysis group warned on June 28, that LUNC could plunge because “the technology behind it is dead”:
“This is not a boom, bust and boom again cycle, LUNC has no reason to exist and neither does its price. While we can appreciate the natural desire of investors for superior returns, there are better ways to do it.”
In theory, the outlook for USTC is indeed bleak as it fails to fulfill its primary function of providing customers with a stable digital version of the US dollar. “This is a game for whales only. The risk of losing money from retail investors is very high,” Crypto Bull tweeted.
The best proof for these points is that the entire Terra ecosystem has “moved home” to version Terra 2.0. Therefore, tokens like LUNC or UST become “worthless” when they cannot be applied to any technology. In addition, the circulating supply of UST remains at 10.2 billion tokens – a huge number and a headache if the UST wants to recover.
With the market situation in general and Terra tokens in particular, investors should be careful in their decisions.
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