Cryptocurrency UST, a stablecoin that’s tethered to the U.S. dollar, has plunged to $0.31 U.S.
The selloff in UST comes as Bitcoin (BTC) and Ethereum (ETH) begin to recover after sharp declines over the past week. Bitcoin is up about 1.5% and currently trading at $31,800 U.S. while Ethereum has risen 3% to $2,400 U.S.
Stablecoins are like bank accounts for the cryptocurrency economy, offering a store of value to avoid the kind of volatility that digital tokens such as Bitcoin have become notorious for. However, that theory does not appear to be playing out as markets continue to decline.
UST uses a complex system of minting and burning tokens to adjust supply and stabilize prices. UST’s price has crumbled under the pressure of a selloff in cryptocurrencies, resulting in further panic in the market.
Do Kwon, the UST’s creator, has amassed billions of dollars’ worth of Bitcoin through his Luna Foundation Guard fund to support the stablecoin in times of crisis. The fear is that Luna Foundation Guard dumps those Bitcoins onto the market, resulting in an even bigger selloff.
Elsewhere, cryptocurrency traders have been shaken by concerns over Coinbase’s (COIN) financial health. Shares of the crypto exchange were down 19% in pre-market trading today (May 11) after the company reported a 27% decline in its first-quarter revenue.
Bitcoin briefly slumped below $30,000 U.S. on May 9, its lowest level since July 2021. The world’s biggest digital coin is now hovering slightly above that level. It’s fallen over 50% since setting an all-time high of nearly $69,000 U.S. last November.
UST has grown to become a major player in the cryptocurrency economy, with a circulating supply of 16 billion tokens. Investors are now closely watching for how Luna Foundation Guard responds to prop up the slumping stablecoin.
