According to CoinGecko data, Terra’s UST is currently the third-largest stablecoin by market cap, after only Tether’s USDT and Circle’s USDC, but has a much lower trading volume than Binance USD (BUSD).
As shown in the statistics, the market cap of UST is now $17.58 billion, slightly more than the market cap of BUSD, which is $17.54 billion. However, BUSD has a trading volume of nearly $3 billion in the last 24 hours, whilst UST has a trading volume of about $672 million.
Terra’s UST is undeniably the most popular algorithmic stablecoin in the crypto market, and its ascent has been attributed to a number of causes, including the surge in the value of the LUNA token and the Luna Guard Foundation’s decision to back up the token with Bitcoin.
In general, an algorithmic stablecoin relies on market movement, among other things, to keep its $1 peg. The stablecoin’s supply has grown rapidly in recent years, rising from roughly $1.9 billion in June 2021 to over $6 billion by November of last year.
As of press time, that figure has risen to more than $17 billion, indicating the crypto community’s rising confidence in the asset.
Terra’s supply growth does not match its trading volume, as we previously stated, which has prompted various worries among the crypto community.
Due to the huge incentives for staking Luna on Anchor, some skeptics have characterized Terra as an unsustainable TVL farm. We revealed last month that a wager had been placed that the value of LUNA will be substantially lower in a year than it is now.
These doubters believe LUNA is a Ponzi scheme with little long-term viability, and they point out that the asset’s foundation purchase of Bitcoin and other digital assets demonstrates the developers’ fear of their own tokens.
Furthermore, with the Neutrino algorithmic stablecoin recently losing its peg to the dollar, some have utilized the occasion to emphasize how fragile algorithmic stablecoins may be.
Over the weekend, Luna was the worst performing among the top 10 Cryptocurrencies after Bitcoin dropped below $40k. Although it has since bounced back to trade above $80, it has lost more than 25% of its value in the last 14 days.