Here's Everything You Need to Know About TerraUSD, Tether, and Other Stablecoins

 Crypto winter could bring more casualties to the stablecoin camp. Tether (USDT) appears to have lost its footing as TerraUSD (UST) de-pegged from the U.S. dollar on Tuesday, sparking a market sell-off, slipping lower against the U.S. dollar.

As the name suggests, the algorithmic stablecoin UST is backed by an algorithm. The ecosystem’s corresponding token, LUNA, has lost more than 95% since Tuesday, while UST continues to hover around the $0.01 mark.

Cointelegraph experts shared their explanation of why UST crashed in yesterday’s special edition of Market Reports. Terraform Labs’ algorithmic stablecoin plans continue to roll out, but UST is still struggling.

Data from Cointelegraph Markets Pro confirms that various stablecoins are more volatile than usual: USDT, the world’s largest stablecoin, trades below $0.99, Gemini Dollar (GUSD) exceeds $1, and USD Coin (USDC) also sees appreciation.

Paolo Ardoino, CTO of Bitfinex and Tether, clarified the difference between asset-backed and algorithm-backed stablecoins in a conversation with Scott Melker:

“For example, if you want to do an algorithmic stablecoin, it has to be 300% backed by solid assets, solid cryptoassets — not 105%, 110% or even less. [...] That doesn’t make sense.”

Ardoino shared that for UST to work, it would require a 3x investment, or over $50 billion:

In an earlier tweet, Ardoino reminded crypto enthusiasts that “Tether is USDT for $1,” and he spread calm in the industry. For crypto veterans like Whale Panda, the distinction between stablecoins is clear: Tether FUD (fear, uncertainty, and doubt) is "the scariest of all":

People confused $USDT and $UST and panicked.
People don’t understand the difference between undercollateralized algorithmic stablecoins and backed stablecoins.
Panic selling $USDT for $USDC and plain old $USD.

The most frightening period.

WARNING: This post will attract "Tether believers"

— WhalePanda (@WhalePanda) May 12, 2022

The price of USDT has recovered from a very brief drop this morning to $0.95, but has yet to reach parity with the US dollar. In a recent development, Tether plans to transfer $1 billion in USDT from Tron to Ethereum and Avalanche. This will not change the total supply of Tether, the company said in a tweet.

Jan3 CEO Samson Mow also rallied the power behind USDT:

USDt will not lose its peg. Know when a player is just trying to cause a panic.

— Samson Mow (@Excellion) May 12, 2022

Nic Carter of Castle Island Ventures downplayed the stablecoin saga, joking that he will be attending a stablecoin event:

Might not be the right time...but shall we still be doing this next week?

— nic carter (@nic__carter) May 11, 2022

Billion-dollar business”. Danger averted. An article shared by the 20 team explained that they are “on track to deal with Tether today. Additionally, the two basis points of the difference USD 1 have been reverted to USDT at the time of writing,