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UST - Terra stablecoin: Timeline of events

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Executive Summary


While relatively new, the stablecoin market expanded rapidly in early 2021, growing from US$12.2 billion in July 2020 to US$109.3 billion in July 2021. While today in 2022, the stablecoin market is equivalent to US$155.5 billion. It is thus no surprise that stablecoins have received so much attention from regulators over the past 6 months.


A stablecoin is a type of digital asset (cryptocurrency) designed such that its value is tied (pegged) to another currency, commodity, or financial instrument. Originally, stablecoins were developed to serve as a potential substitute of fiat currency, to minimize the price volatility of cryptocurrencies which made them “less suitable for wide use transactions.”


They are currently used as a bridge between crypto and traditional money, facilitating the

on/off chain, but also for crypto trading, via cryptocurrency trading pairs - such as bitcoin - tether or ether - tether.


To provide some context on stablecoins, more generally, and the events leading to UST crash that occurred in May, we herein briefly present/discuss:

  • A broad overview of the four main types of stablecoins, which differ in their ways of maintaining their peg: fiat-backed, crypto-backed, algorithmic, and commodity-backed.

  • An explanation of UST’s pegging mechanism.

  • A detailed timeline of events that contributed to the crash of UST, the fall of Terra, and [some of] the impact on other stablecoins.

  • The stability (or lack thereof) of stablecoins.


Download our full report

UST - Terra stablecoin
.pdf
Download PDF • 2.83MB

 

Get in touch with the authors


Our team is made up of dedicated, and experiences executives and consultants, representing the right mix between seasoned entrepreneurship

and professional consulting skills.





Sabrina McNeil

Senior consultant



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