Another Stablecoin Follows LUNA $UST, Crashes Within Hours

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What-Is-a-Stablecoin

Last week saw chaos in the cryptocurrency market due to the unprecedented crash of Terra’s UST stablecoin and LUNA. The crash resulted in traders debating about the trustworthiness of stablecoins, the latest being DEI price. This adds $DEI to other algorithmic stablecoins including UST and USDT which have also lost their peg to the dollar. Panic due to UST’s crash last week resulted in massive drop in prices of a majority of cryptocurrencies.

DEI follows UST in fresh crash

In a fresh case of stablecoin depegging from the dollar level, the$ DEI stablecoin had on Monday lost the $1 peg. DEI’s price dropped to an abysmal low of 52 cents, according to CoinMarketCap. As of writing, the stablecoin was trading at 68 cents. The current market cap of DEI is around $63 million.

Algorithmic stablecoins have an inherent ability to maintain balance with fiat currencies like the U.S. Dollar. They are often undercollateralized, which means they are not backed by enough assets in reserves to back the total value of stablecoins. An algorithm that monitors the supply and demand equation between the stablecoin itself and another coin that backs it, serves as the backbone.

DEI Price Restoration

The DEUS Finance DAO, which backs the $DEI stablecoin, provides financial infrastructure. Financial instruments, such as synthetic stock trading platforms, options and futures trading are among those offered by Deus. Earlier on Monday, it informed that their team is working on solutions to maintain stablility. They said in a tweet,

“Our team is working around the clock to restore the DEI peg. Mitigation measures were implemented immediately and solutions are being developed for long-term stability.”

The decline in $DEI price comes after a UST bloodbath in the market wiping out billions of dollars of investor money last week. Another Terra cryptocurrency LUNA, which is mutually exchanged with UST, also lost more than 99% of its value as a result.

Meanwhile, the Luna Foundation Guard (LFG) revealed that the recent Terra crash and its measures to support UST had wiped out most of its reserves. Its holdings now stand at about $260 million. Less than two weeks ago, LFG had reserved of over $4 billion.

Anvesh reports major developments around crypto adoption and price analysis. Having been associated with the industry since 2016, Anvesh is a strong advocate of decentralized technologies. Follow Anvesh on Twitter at @AnveshReddyBTC and reach him out at [email protected]
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.

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