What caused Terra crash?

What caused Terra crash?

The controversial stablecoin UST — which is meant to be pegged to the dollar — plummets below 50 cents. Embattled crypto project Terra’s 2 main tokens now are falling dramatically. TerraUSD, or UST, a ‘so-called stablecoin.’ Meant to maintain a 1-to-1 peg with the U.S. dollar.

But the cryptocurrency plunged to as low as 31 cents Wednesday morning. It was last trading at less than 64 cents, according to https://coinmarketcap.com/currencies/terra-luna/.

Sister token luna dived 95% to just $1.69 and now is at less than 3 cents: https://coinmarketcap.com/currencies/terra-luna/

Moreover, the latest plunge means luna has erased more than 98% of its value in the last seven days.

Stablecoins are akin to bank accounts for the crypto economy. Offering a sound store of value to avoid the kind of volatility cryptocurrencies like bitcoin have become notorious for — in theory, at least. UST, an “algorithmic” stablecoin. It uses a complex system of minting and burning tokens to adjust supply and stabilize prices. UST’s price has crumbled under the pressure of a sell-off in cryptocurrencies recently, resulting in further panic in the market. Elsewhere, crypto traders became rattled by concerns over Coinbase’s financial health.

Coinbase shares were down 19% in pre-market trading Wednesday after the company reported a 27% slide in first-quarter revenue. Over the last 5 days the stock has fallen from $120 to $49 as of today.


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What caused Terra crash?