This week has been somewhat difficult for the space as numerous digital assets plummet.
Bitcoin, the most popular digital asset and the one most looked at as a gauge of the space’s success, has been on a slow but steady decrease over the last few months. Ending last year at an all-time high of around $68,000, Bitcoin, at the time of writing this, has almost gone below $30,000.
Ethereum has also seen some drastic shifts. Following the token hitting an all-time high of around $4,800 late last year, it currently sits at $2,252.18. Major digital assets Solana, Cardano, and Avalanche have also crashed.
Overall, confidence in the space has been tested for numerous reasons. The Federal Reserve’s plans to raise interest rates this month, the current conflict in Ukraine, and rising inflation are all factors that have led to the diminishing price and interest in digital assets.
This has trickled down to numerous other digital assets, with TerraUSD being one of the more significant hits taken by the space.
The TerraUSD token is an algorithmic stablecoin, meaning it uses a system of minting and burning tokens to adjust supply and stabilize prices.
TerraUSD or UST has dropped significantly, sending the entire space into shock and fear as TerraUSD is a stablecoin designed to maintain a one-to-one peg with the U.S. dollar. Still, it has plunged as low as 26 cents. At the time of writing this, TerraUSD is sitting at around 66 cents, a 27.05% decrease in the past 24 hours.
The recent significant price drop in TerraUSD, due to a major sell-off has resulted in panic in the market. This prominent stablecoin was intended to be a store of value, but with these recent developments, its value appears to be as fragile as other volatile digital assets.
How Terra is Working to Prevent its Digital Assets from Plummeting
In response to the recent events, Do Kwon, the creator of TerraUSD, stated that he endorses increasing the rate at which new Luna, another Terra-based digital asset, is minted daily as proposed by the community. Through this process, the supply of TerraUSD will be eaten up to help recalibrate the ecosystem.
Kwan stated: “I understand the last 72 hours have been extremely tough on all of you – know that I am resolved to work with every one of you to weather this crisis, and we will build our way out of this.”
Though digital assets are plummeting, we will motor through the bear part of the market cycle.