Not all Stablecoins Built the Same: What caused TerraUSD ($UST) to “Break the Buck”
With weeks, months of bleeding in Satoshi streets and extreme fear of Inflation, a heavy load of sell-offs are rising negative market sentiments. The next big shocker is the stablecoins the world is eyeing right now to see the future of stablecoins after the tumultuous market crash of Terra (USD).
So what makes Stablecoins so important?
Stablecoins are an important aspect of the crypto world since they allow traders to keep their money in the digital asset ecosystem while keeping value. During instances of high volatility, investors turn to them for a safe haven, or even as a means of digital payment.
Now, if you evaluate carefully there are keyholes on whether TerraUSD’s one-of-a-kind mechanism may be phased out, at least for projects that become too big to fail.
According to Celsius Network CEO Alex Mashinsky, the participants in the crypto market should be aware that not all stablecoins are created equal.
They are basically crypto assets well designed to have a comparatively stable value by being pegged to a commodity or currency like the US dollar.
How Celcius is dealing with the crisis?
Following the death spiral of Terra’s algorithmic stablecoin TerraUSD (UST), the crypto lending platform’s CEO claims in a new interview that not all stablecoins are equal.
He further elaborated the fact that “It’s critical that people realise that not everyone who claims to be a stablecoin actually is one. Just because you have a stablecoin-like algorithm does not mean you are a stablecoin.
Celsius supports 14 distinct assets that are classified as stablecoins, however, it is divide into categories. You have the USDC (USD Coin), TUSD (TrueUSD), and USDP (Pax Dollar), which is the Paxos coin, and you know that for every dollar, token, or ERC-20 that is produced, there is a dollar sitting in a bank account as cash or treasuries.”
Therefore, as a result, the majority of stablecoins retain a 1:1 ratio with their choice of the peg. This basically indicates that 1 DAI or USDT equals 1 unit of the underlying currency, which is usually the dollar.