Terra Foundation might fuel the drop of the cryptocurrency market
Terra Foundation, considered a savior of the cryptocurrency market in March with a first billion buying spree cryptocurrencycould now be the reason for digital gold’s massive drop to $34,500.
Following massive outflows from UST on Anchor, holders of the stablecoin had to witness a brief de-pegging, which caused the price of the stablecoin to drop below $1. To regulate the prices of stable assets, the foundation had to sell some of their BTC holdings, which added even more pressure to the poorly performing asset.
It’s not yet clear how much of their Terra Foundation funds sold, but it won’t be an imperceptible amount as Anchor reported $2.3 billion in outflows, indicating massive outflows from the stablecoin asset.
Why are people moving away from UST?
While there are at least two reasons behind the increased outflows, the major cause is tied to increasing volatility on the cryptocurrency market, followed by increased demand in exit liquidity.
As Bitcoin and other cryptocurrencies plunge even lower, panic sentiment has overtaken the market and is causing massive outflows from stable and steady digital assets. According to CoinMarketCap, the market has lost at least $200 billion in capitalization.
The second reason that fueled the outflows could be tied to the release of USDD stablecoin by Tron, which will offer greater rates for liquidity provision at the start of the project. But while some traders are looking for more profits, others remain cautious and prefer leaving the market for good.
