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Stablecoins prove to be a safe haven as other coins drown in the crypto crash



Even though the recent crypto crash has affected many, stablecoins are enjoying all the way, with some of them attaining new all-time highs.

Just as the name suggests, centralized stablecoins have proved stability in the crypto crash that has affected many. Currently, two stable coins have attained an all-time high and moved to the top ten crypto assets by market capitalization. 

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Tether has had many fans for a long time, and this time it made it to the third position despite the market downturn. The USD coin was not left behind either; it made it to the eighth position. From Coingecko’s data, the two stable coins account for 80% of the whole stablecoin capitalization of $100 million. As a result, there has been a stablecoins supply surge by 190% in just three months. Apart from the two, MakerDAO’s DAI has fared pretty well in the turbulent market. 

Algorithmic Stablecoins

Contrary to expectations, algorithmic stablecoins have not had a bright season. Most of them have drowned after the price of their underlying assets swamped. A good example is the Terra USD ($UST), whose price dropped to $0.92.

UST comes as a result of burning the LUNA coin, which is its base. Just like other currencies, the value of UST depends on the forces of demand and supply. Since it is an algorithmic token, its demand and supply depend on LUNA, and its holders determine the arbitrage opportunities. LUNA holders are the ones that drive the price of UST, and they can also mint it if they want to maintain peg stability. LUNA has been massively affected by the crypto crash, making it lose up to 70% of its value as from Wednesday.

Terra is another one that has been adversely affected by the market conditions. Its Co-founder, Do Kwon, tweeted on May 23, expressing they are undergoing an extreme test in the market. He confirmed that the token has not changed a thing, not even the fundamentals, and has still been affected by the turbulence.

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Ampleforth is also on the same train. Its token experienced its lowest low on May 23 at $0.48, which is way far from its target of one dollar. Ampleforth protocol can be affected by demand and supply to expand, contract, or maintain equilibrium. That means that when the market is volatile, it can adversely affect it, making it hard to maintain its peg.

As for RAI, the ethereum backed stablecoin; its situation was not so bad as it was not so far from its targeted $3. Its interest rate count algorithmically counterbalances its price fluctuations serving as an incentive to traders.

Image by Business Herald from Flickr.



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