UST failure shakes stablecoin economy, wiping out nearly $40 billion
As of press time, the top stablecoins by market capitalization are now worth $160 billion after the economy was valued at nearly $200 billion just last week. Of course, the culmination of the UST’s failure wiped billions of dollars off the stablecoin economy. Not only wreaking havoc on the economy, Terra’s demise also brought about major changes in the stablecoin ecosystem.
Just a week ago, the stablecoin economy was approximately $200 billion, but the Terra disaster changed all that. UST used to be the 3rd largest stablecoin until it lost its $1 peg. Tokens pegged to the value of US dollars are currently trading below $0.20. However, its current valuation places it at the 5th largest market cap on CoinMarketCap’s list.
Over the past month, most of the top stablecoins by market valuation experienced negative growth. The only two stablecoins in green are USDC (+0.05%) and BUSD (+0.24%). BUSD is currently the third-largest stablecoin with a market cap of $17.6 billion and has also broken into the top 10 cryptocurrencies by capitalization, taking 8th place out of more than 13,400 coins.
Makerdao’s DAI token is the 4th largest stablecoin with a market capitalization of over $6 billion. Makerdao’s MKR native token price has been up 2% in the past 24 hours as the UST fails. In fact, most stablecoins managed to stay stable and up the ranks thanks to the collapse of the UST.
On May 12, 2022, Circle Financial CEO Jeremy Allaire tweeted:
On CNBC’s Squawk Box broadcast, the Circle operator emphasized the need for “a stricter regulatory framework for stablecoins.”
A lot of people have been continuously monitoring the performance of decentralized stablecoins and algorithms since the demise of Terra. Despite the recent UST market carnage, they still believe that centralized giants have a great need for decentralized stablecoins and algorithms.
According to Avalanche (AVAX) founder Emin Gün Sirer, the crypto ecosystem needs decentralized stablecoins. A day before LUNA fell below $0.01, Gün Sirer said:
The AVAX founder also stated that “algorithmic stablecoins can be destabilized for bank runs.” Despite this risk, Gün Sirer explained that there is still a need for decentralized stablecoins in the industry.
“We need a decentralized stablecoin. Fiat-backed stables are subject to legal seizure and capture. A decentralized economy needs a decentralized stablecoin whose backing store cannot be frozen or confiscated,” said Gün Sirer.
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