The post Not all Stablecoins Built the Same: What caused TerraUSD ($UST) to “Break the Buck” appeared first on Coinpedia – Fintech & Cryptocurreny News Media| Crypto Guide

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.

Stablecoins (Un)Stable!

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.

Spectrum of stability

Going down to the streets even if the value of the stablecoins mentioned varies in some crypto exchanges, owners can still redeem the full value of their holdings through the stablecoin issuer, according to Mashinsky.

So in short, Stablecoins are tied to the value of mainstream assets such as the dollar to enhance confidence and are the primary means of transferring funds between cryptocurrencies or into fiat currency.

He analyzed the situation from the investor’s point and here is what he said in respect of the current momentum:

“You can redeem it at any time, and people need to understand that just because something trades for $0.98, even if USDC trades for $0.98 on some exchange, doesn’t mean it’s worth anything. They look at the exchange price, whether it’s on Binance or FTX, which simply implies that a willing buyer and seller exchange hands at $0.98 on that platform. It’s critical that people understand that this has nothing to do with USDC, USDT, or anyone else.”

Causing wobbles in the street!

The crypto meltdown fell across the board as a result of the crisis; they eventually stabilised and recovered, but not without wiping $300 billion off the sector’s trillion-dollar total market value. Most notably, it caused more trembles in even the largest collateralized stablecoins, which are backed by dollar and dollar-equivalent assets — though they, too, were back to normal by the end of the week.