The stablecoin terrausd (UST) lost its parity with the U.S. dollar and dropped to an all-time low of $0.66 per unit

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The stablecoin has been one of the most topical discussions in crypto during the past 24 hours, as many have been betting on whether it will fail or recover

Crypto Community Assesses Stablecoin’s Damaged Reputation

However, by 9:15 a.m. (ET) on Tuesday morning, the stablecoin has managed to climb back to $0.934 per unit

UST Stablecoin Plunged to $0.66 per Unit, Rumors Spread Like Wildfire

The Terra blockchain project has been suffering in recent times, as the network’s native asset LUNA has shed 43.6% against the U.S. dollar during the past 24 hours. Moreover, the stablecoin terrausd (UST) has also been dealing with intense pressure as the token’s value plummeted from $0.99 to a low of $0.66 per unit. On a few exchanges, UST dropped as low as $0.62 per unit during periods of extreme selling. Just before UST dipped $0.09 lower than the $1 peg, Terra’s co-founder Do Kwon told the public that the team was “deploying more capital.”

During the course of Monday evening, the Luna Foundation Guard (LFG) emptied the LFG bitcoin wallet that once held approximately 70,736.37 BTC. Currently, there is zero bitcoin in the wallet as it has been drained dry. The same can be said for the LFG Gnosis safe address, as the ethereum address held $143 million on May 3. Today, the wallet holds $135.58 in ether, and a few other ERC20 tokens with small values. While LFG and Do Kwon told the public on Monday that $1.5 billion in bitcoin and UST would be lent to market makers, the current moves have been less transparent.

UST Rebounds From $0.66 per Coin to $0.93, Crypto Community Assesses Stablecoin's Damaged Reputation
The stablecoin UST has been trying to regain strength and has surpassed the $0.90 mark on Tuesday morning (ET).

While UST plunged to $0.66 per unit, a large number of theories swirled around the crypto industry. There have been claims that the multinational hedge fund and financial services company Citadel was involved. Reports further claim that Binance order books had paused during the UST sell-off. For a small period of time, Binance paused LUNA and UST withdrawals. Additionally, there’s been talk of well-known crypto funds bailing out Terra as well, by funneling billions back into the stablecoin’s ecosystem.

“There is a rumor spreading about Jump, Alameda, etc. providing another $2B to ‘bail out’ UST,” theblockcrypto head of research Larry Cermak tweeted on Monday evening. “Whether this rumor is true or not, it makes perfect sense for them to spread. The biggest question here is, even if they can get it to $1 by some miracle, the trust is irreversibly gone.”

After UST Rebounds to $0.93, People Question Trusting the Stablecoin Project, Anchor TVL Slips by 43% in a Single Day

Discussions about people losing trust in LUNA, UST, and Terra, in general, have been littered all over social media. “No matter how this ends, I don’t want people to call UST decentralized again,” the bitcoin advocate Hasu tweeted on Monday. “Even the little collateral backing it has is intransparent and controlled by a single party. Used to perform discretionary open market operations. This is like 10x worse than the Fed,” Hasu added.

Investor Lyn Alden also made a statement about the Terra disaster after she predicted it could happen last month. “Terra’s multi-billion-dollar algorithmic stablecoin UST blew up today,” Alden said. “Aside from destroying the value of LUNA, they used their bitcoin reserves to try to defend the peg, kind of like a flailing emerging market using its gold reserves to defend its FX.”

During the overnight trading sessions and into the trading sessions on Tuesday morning, UST has been recovering from the losses. So far, terrausd (UST) has managed to climb back to $0.934 per unit, or down 6% from the $1 parity. Terra’s co-founder Do Kwon has not tweeted since saying the ‘A-team’ was deploying capital, even though the co-founder is very well-known for defending his project. At the same time, LFG has also not updated the public since its last tweet, which said it would provide more updates.

In addition to the problems with LUNA’s and UST’s price, the decentralized finance (defi) lending protocol Anchor has shed 43.7% of its total value locked (TVL) during the past 24 hours. At the time of writing, Anchor has a TVL of around $7.22 billion and $95.08 million is Avalanche-based collateral. Anchor was once the third-largest defi protocol, and it has dropped down to the sixth position on Tuesday.

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