Tether, The Largest Stablecoin Drops Under IDR 14649

Posted on May 13, 2022 in Cryptocurrency

COINHOT – Tether, one of the largest stablecoins in the world, broke the price below USD 1.00 on Thursday to be exact in the range of USD 0.98 or around Rp. 14,357 (assuming an exchange rate of Rp. 14,649 per US dollar). This drop coincided with panic in the crypto market.

These stablecoins, including Tether (USDT) their value is meant to be pegged to one to one with the US dollar. However, currently the price is touching USD 0.98 which in general if it declines, USDT is only around USD 0.99.

The drop in Tether comes after Terra network stablecoin Terra USD(UST) plunged below USD 0.30 on Wednesday.

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The international head at crypto exchange Luno, Vijay Ayyar said the move was likely fear-driven by speculation of the UST crash phenomenon.

“The environment is ripe for such news events to cause ripples in the market as we can see,” Ayyar said.

Stablecoins are similar to bank accounts in the crypto world, designed to serve as a store of value that investors can use in times of high market volatility.

Tether and USDC, are the two largest stablecoins, both backed by a sufficient amount of fiat money held in reserve to ensure depositors can receive their dollars when they want to make a withdrawal.

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However, there have long been concerns about whether Tether actually has enough assets to support its price steady at USD 1.00.

Tether, the company of the same name, previously said all of its tokens were backed one-to-one with dollars held in reserve.

However, following a settlement with the New York attorney general, it was revealed that Tether was not only using US dollars, but was relying on various other assets including securities, a form of short-term unsecured debt, to back its tokens.

Tether has since reduced the amount of commercial paper in its reserves and said it plans to scale back its holdings further over time.

Previously, Tether Chief Technology Officer Paolo Ardoino insisted Tether holders would always receive USD 1.00 when exchanging their tokens.

Bitcoin and other cryptocurrencies continued their decline Thursday as investors reacted to concerns around rising inflation and the deteriorating economic outlook.

Previously, LUNA Coin was currently in the spotlight because its price plunged very deep on Thursday, May 12, 2022. LUNA’s price was traded below USD 1.00 or even USD 0.3118, or around Rp. 4,544, its lowest price since September 2021.

So what exactly is LUNA Coin? Before entering into the discussion of LUNA Coin, it is necessary to know in advance about the network where LUNA is located, namely Terra.

What is Terra?

Terra is a blockchain created with the aim of creating a decentralized digital payment ecosystem using Stablecoins. Stablecoins are crypto assets created to have a value equivalent to fiat currencies. The popular stablecoin asset that Terra created is Terra USD (UST).

Reporting from Coinmarketcap Thursday (12/5/2022), Terra’s development began in January 2018, and its mainnet officially launched in April 2019. Starting September 2021, it offers stablecoins pegged to the US dollar, South Korean won, Mongolian tugrik, and other currencies. International Monetary Fund Special Drawing Rights.

LUNA is the Terra network’s native cryptocurrency used to stabilize the price of the protocol’s stablecoins. LUNA holders can also submit and vote on governance proposals, granting them governance token functionality.

Founder of Terra

Terra was founded in January 2018 by Daniel Shin and Do Kwon. Both understand the project as a way to encourage rapid adoption of blockchain technology and cryptocurrencies through a focus on price stability and usability. Kwon takes on the position of CEO of Terraform Labs, the company behind Terra.

Prior to developing Terra, Shin co-founded and led Ticket Monster, otherwise known as TMON, South Korea’s premier e-commerce platform. He later founded Fast Track Asia, a startup incubator that works with entrepreneurs to build fully functional companies.

Kwon previously founded and served as CEO of Anyfi, a startup that provides decentralized wireless mesh network solutions. He has also worked as a software engineer for Microsoft and Apple.

Terra seeks to differentiate itself through the use of fiat-pegged stablecoins, stating it combines the unlimited benefits of cryptocurrencies with the day-to-day stability of fiat currency prices.

It creates a one-to-one stake through an algorithm that automatically adjusts the supply of stablecoins based on their demand. It does so by incentivizing LUNA holders to trade LUNA and stablecoins at favorable exchange rates, as needed, to expand or contract the supply of stablecoins to match demand.

Terra’s Role for UST

Apart from owning LUNA, Terra also owns a Stablecoin called Terra USD (UST). The LUNA and UST tokens are interdependent, as the success of the Terra ecosystem is a function of the adoption of UST as a stablecoin.

LUNA supports UST and catches fire when demand for UST increases. After the Columbus-5 upgrade, the supply of LUNA could become very deflationary in the long run. On the other hand, the LUNA value may also fall if UST is considered unstable.

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