The USD-pegged Terra ecosystem’s UST recently overtook Binance’s BUSD to become the third-largest stablecoin by market capitalization.
Soon 20 billion capitalization
The war between “stablecoins” is raging. On Monday, the Terra ecosystem’s UST surpassed Binance’s BUSD. According to CoinGecko, UST just overtook BUSD, another stablecoin primarily used on the Binance exchange. UST, the stablecoin of the Terra/Luna blockchain, continues to climb strongly.
Like the more famous stablecoin USDT (Tether), UST is a “digital clone” of the US dollar, a virtual asset whose value is based on the US dollar. Mainly used for asset conversion or value storage during volatile markets.
Its market cap is just over $17.5 billion, making it a more popular asset than BUSD, another stablecoin, this time “centralized” since Binance’s inception. The latter’s market capitalization was $17.46 billion on Monday. UST’s market capitalization jumped 15% in the past month, hitting a new high on Monday.
However, Tether (USDT) continues to dominate this new competitor with a market capitalization of $82.8 billion. It is followed by USDC with a market capitalization of $50 billion today.
These stablecoins rely on centralized entities to maintain their peg. UST is an algorithmic stablecoin, meaning its price is stabilized using an algorithm powered by smart contracts.
Terra offers its users the possibility of arbitration. For example, these could burn LUNA governance tokens to dilute the supply of UST stablecoin to ensure its price remains at $1. Users can also exchange UST tokens for LUNA. They then make a profit while preventing the former from losing their anchorage.
Although UST has overtaken BUSD, it seems to be lagging behind its peers in terms of trading volume. For example, in the past 24 hours, UST traded at $570 million, while BUSD traded at $4.5 billion over the same period. With low FX activity, there is every indication that UST’s market capitalization growth is due to its reserves and circulation rather than an increase in actual demand for the token.
What future prospects?
If it continues this momentum, it could even overtake the USDC by the end of the year. In just six months, UST’s market capitalization has increased fivefold. The prosperity is due to the explosive growth of the Luna ecosystem, but above all to the many assets of the region, including an APY of 19.46%.
But the dynamics of the Terra ecosystem are not based solely on their stablecoins. The LUNA token has also shown very good growth in recent months. In just over a year, LUNA has gone from $13 to over $90, a +592% increase, according to CoinGecko. With a market capitalization of $31.8 billion, it is the 8th most popular cryptocurrency among investors.
Launched in September 2020, the Terra stablecoin has become the most popular algorithmic stablecoin in the cryptocurrency market. It is a decentralized stablecoin designed to facilitate payments.
Its rise is explained by several factors, including the increase in value of LUNA and the desire of the Luna Guard Foundation to maintain the token with Bitcoin reserves. Last month, Terra received $10 billion worth of Bitcoin (BTC) to support its stablecoin reserves.
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Terra’s UST becomes 3rd largest stablecoin
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