TerraUSD price prediction: Can the ex-stablecoin recover from a string of lows?
Supposed stablecoin UST should have stayed at $1, but depegging has caused chaos
Read more: Terra Luna 2.0 price prediction and ultimate guide.
The collapsed stablecoin TerraUSD (UST) has been, in effect, abandoned by its developers and a new Terra blockchain with a rejuvenated LUNA token has been launched.
Answering the question, what is TerraUSD (UST), has become a bit more difficult since this change. The original blockchain is now called Terra Classic, its token has been renamed Terra Luna Classic and it now trades with the ticker LUNC.
So what does this mean for a TerraUSD price prediction now? Well, first, TerraUSD has been rebranded as TerraClassicUSD, although many people and sites are still calling it TerraUSD at this early stage. Since there are no plans to launch a new version of UST, we shall use the names interchangeably.
With the collapse in the value of UST to just a few cents, the world of cryptocurrency has learned that stablecoins are not, in fact, necessarily stable.
On 24 May 2022, investors in the associated LUNA crypto voted in favour of proposals to install a new Terra blockchain. The Luna Foundation Guard, the organisation behind the system will, in effect, abandon the original blockchain and, by extension, UST. As it is controlled by the community, it will become collateralised and be backed by reserves in an attempt to return it to parity with the dollar.
However, this move did not have quite the impact on UST that may have been hoped for. In the early hours of 17 June it hit the first in a series of all-time lows, being worth a mere $0.006911.
While a TerraUSD price prediction should always have stayed at $1, after the Terra blockchain was officially halted temporarily and UST became depegged, the coin’s future, under its new name, looks bleak.
What UST was meant to do
UST was designed to be worth one dollar, always and forever. The idea behind stablecoins is to address the incredible volatility of many cryptocurrencies. The way prices can shoot up or drop puts off many potential investors who might otherwise like the idea of cryptocurrencies.
The idea behind stablecoins is to find a compromise. As the name suggests, these coins have (or are supposed to have) the stability of a traditional fiat currency with the privacy, low costs and speed associated with a cryptocurrency.
The UST stablecoin was pegged to the US dollar, which means that it should, ideally, be worth $1 at all times. If you wanted a TerraUSD price prediction for 2025, it should have been $1. Unfortunately for people who have had money tied up in UST (now USTC), as of 30 June 2022 they had lost more than 94% of the value of their holdings.
UST and LUNA
Terra had, in effect, a dual-token system that used the stablecoin TerraUSD (UST) and LUNA to create and stabilise the TerraUSD cryptocurrency. USTs were minted by burning LUNA and could also be swapped for LUNA.
For example, if the UST value went above $1, the equivalent value of LUNA would be burned, which minted more UST, making it less valuable. Whereas if the UST price dropped below $1, UST coins were swapped for LUNA, making UST more valuable.
When UST became depegged, a series of withdrawals from the Anchor Protocol money market followed, which led to a serious drop in the coin’s price and, in turn, led to LUNA collapsing. On 13 May 2022, production on the Terra blockchain was halted and, even though it was resumed later that day, the future for TerraUSD looked bleak.
There was originally a limit of one billion LUNA coins in circulation; if this number was exceeded, LUNA was burned. However, after the depegging, the number of LUNA (now LUNC) increased dramatically, with the circulating supply standing at a little more than 6.5 trillion as of 30 June, according to CoinMarketCap.
From 28 May 2022, LUNA operated on a new blockchain, with the native token of the original blockchain rebranded as Terra Classic (LUNC). Meanwhile, UST would be collateralised and backed with reserves in a bid to reconnect it to the dollar.
What went wrong
The signs of trouble began on 10 May 2022 when TerraUSD fell overnight to around $0.68. This drop in price caused Luna’s market cap to be less than UST’s, which potentially suggested that the Luna Foundation Guard was not able to back TerraUSD’s price.
The news came after the Luna Foundation Guard announced that it was to effectively loan out $1.5m of Bitcoin to professional market makers, in an attempt to keep the stablecoin pegged to the dollar. This announcement came before the value of Bitcoin itself collapsed to a 10-month low.
The dive continued on 11 May, as UST dropped to a low of $0.2998. When the currency’s co-founder, Do Kwon, announced that the Luna Foundation would cut the supply of terraUSD in a bid to re-peg the coin, TerraUSD rose to close the day at $0.8011. The collapse continued, however, and by 20 May 2022 it had dropped to a low of $0.0613. A few days later, on 25 May, the coin experienced a sudden surge to a high of $0.3221, but it soon fell back down again to just under $0.07.
News about the new version of LUNA caused UST to rise past $0.10 early the following morning, but by 27 May it was worth $0.042. That morning the Luna Foundation Guard tweeted that the new blockchain would be going live the next day, but this had no positive impact on the price of UST. On 28 May it sank to new depths, reaching $0.01846.
At about 07:30 BST (UTC +1) on 1 June it was worth just $0.01822, and things got even worse the next day when it fell to yet another all-time low of $0.01454. In the early hours of 7 June, it got even worse and dropped to $0.01451, after which it got to $0.01557 at around 08:00 BST. In the morning of the following day, there was yet another record low, this time of $0.01196, before it stood at around $0.012 by 09:45.
In the early hours of 9 June, it fell to another low, descending past the cent to reach $0.009257. On 10 June, it was valued at being worth more than a cent for the last time, with an intraday high of $0.01199, before it continued its decline. In the early hours of 17 June, it reached the latest in a series of record lows at $0.006911, and it traded at around $0.0074 by 10:05 BST that day.
There was a further drop and, on 18 June, it reached a fresh all-time low of $0.006218. In the week or so after that, though, it seemed to start a very slow recovery and, by about 14:45 BST (UTC +1) on 24 June it was worth about $0.0166. The slow return to form continued and, on 29 June, it reached a peak of $0.08966, before it slid down again to trade at $0.051 at around 14:20 BST (UTC +1) on 30 June 2022.
TerraUSD price forecast
With the current uncertainty surrounding UST, making any sort of TerraUSD coin price prediction is probably a fool’s errand. It is certainly no longer worth $1 forever, as it was supposed to be when it was a stablecoin.
That said, USTC is also still supposed to be a stablecoin and, since forecasts for stablecoins can fall prey to the vagaries of forecasting algorithms, all we really need to know – whether it is a TerraUSD price prediction for 2022, a UST price prediction for 2025, or even a TerraUSD price prediction for 2030 – is that the coin should have hit $1 by then. This, according to some sites, seems unlikely.
For instance, CryptoPredictions argues that it will be at $0.069 by the end of 2022 and will get to $0.072 by December 2026.
Meanwhile, Gov Capital suggests that USTC will ultimately fade away, dropping to a price not even worth measuring, by 16 August 2022. That said, the site also indicates that there will be a recovery to a level over $1 on 30 June 2022, before it drops down to $0.2087 in five years’ time.
On the other hand, CoinArbitrageBot – usually one of the most bullish crypto forecast sites – says that USTC will get to a little over $0.10 this year, but will stay there until 2025 at least.
Finally, WalletInvestor also believes the coin will weaken further, suggesting it will drop to $0.000462 in June 2023.
UST was launched in 2020 by the Terra blockchain and the cryptocurrency exchange Bittrex. There was a strong link between UST and Terra’s LUNA coin. Terra operates under a proof-of-stake (PoS) model, which means that people get paid based on how much LUNA coin they already hold.
On 28 May 2022, though, after a vote by terra holders, LUNA was relaunched on a new chain, with UST being removed from its algorithm and collateralised with reserves, as the former LUNA was rebranded as LUNC and removed from its responsibility of pegging UST.
The blockchain was founded in 2018 by Daniel Shin and Do Kwon, both from South Korea. On 4 May 2022, the coin’s market capitalisation was almost $19bn. On the morning of 27 May, its market cap was around $476m, and it was the 86th largest crypto by that measurement.
By 17 June, though, it had a market cap of around $76m, making it the 270th largest crypto. In terms of stablecoins, it was fifteenth, behind Tether, USD Coin, Binance USD, DAI, TrueUSD, Pax Dollar, Pax Gold, Tether Gold (two stablecoins based on the price of gold), USDD (a recently launched algorithmic stablecoin based on the TRON blockchain), Fei USD, Gemini Dollar, Frax, USDX Kava and Stasis Euro, a stablecoin linked to the euro fiat currency.
A week later, things looked like they might be getting a little bit better. Its market cap had risen to just under $170m, and it stood as the 142nd largest crypto. It was now the eleventh largest stablecoin, behind Tether, USD Coin, Binance USD, DAI, TrueUSD, USDD, Pax Dollar, Pax Gold, Fei USD and Gemini Dollar.
After a week or so of a mini-recovery – albeit one with a drop back in price – on 30 June 2022, TerraUSD had a market cap of around $528m, making it the 69th largest crypto and the eighth largest stablecoin, behind Tether, USD Coin, Binance USD, DAI, TrueUSD, USDD, Pax Dollar and Pax Gold.
For context, on 26 May, UST’s market cap was just over $1bn, and it was the 50th largest crypto in total and the fifth largest stablecoin.
Whether it can maintain both its position and its designation as a stablecoin is up in the air at the time of writing.
As of 30 June 2022, there were 10.25 billion USTC in circulation. This is down from 27 May, when there were 11.28 billion UST in circulation which, in turn, was down from 12 May, when there were 12.12 billion UST in circulation, and from 10 May, when there were 18.13 billion in circulation.
This is because of plans to reduce the number of UST in the ecosystem as part of an attempt to repeg the coin to the US dollar.
There are only the smallest signs of recovery at the time of writing (30 June 2022), so we will have to hope that plans to collateralise UST with a reserve will work. We do not know at this stage if and when any recovery will take place.
You will need to do your own research and proceed with extreme caution, given the recent crash. Remember that prices can go both down and up (even with stablecoins), and that you should never invest more than you can afford to lose.
This is a question that we don’t know the answer to. The crypto is designed to be worth $1 and, considering that it is far less than that at the time of writing, the people behind UST are working to regain the peg.
If it does that, the aim will be for it to stay there. If and when that actually happens is another matter entirely.
This is a question that only you can answer. It depends on your investment goals and your attitude to risk – just remember to conduct your own thorough research first.