Price of popular stablecoin Terra collapses

A popular stablecoin has fallen in value by more than half in recent days. The price of the TerraUSD fell to a low of $0.30, while the coin has been known to always be worth one dollar.

The value of the Terra fell to earlier this week a low of $0.30, although the exchange rate is now back at about $0.60. This is striking for the coin, a so-called stablecoin, whose value should always be equal to one dollar. This is made possible by another coin, the Luna, which can be bought up when the value of the Terra falls. However, the value of the Luna recently collapsed even harder. Its value has been in the past month fell back to almost nothing. At its peak, the coin was worth $116 and now only 20 cents. Therefore, it has become virtually impossible to use Luna to keep stablecoin Terra’s value stable.

The foundation behind TerraUSD also has 80,000 bitcoin in reserve to use as a hedge. It is not clear whether those bitcoins are actually used. The value of bitcoin also fell hard earlier this week and the 80,000 bitcoin may not be worth enough to support the value of TerraUSD. Do Kwon, the founder of Terra and Luna, says he plans to mint more Luna hoping to keep the value high.

Terra and Luna aren’t the only cryptocurrencies to drop sharply in value this week. Bitcoin’s price also fell. It is currently on about 25,000 euros, compared to almost 45,000 euros at the beginning of this year. The price of bitcoin partly determines the price of many other cryptocurrencies.