Terra Classic USD (USTC) price has made a strong comeback in the past few days as investors buy the coin’s dip. The “stablecoin” has jumped in the past seven straight days and is now trading at the highest level since May 27th of this year. According to CoinGecko, the fallen angel has a market cap of more than $841 million, making it the 55th biggest coin in the world.
Why is USTC soaring?
Terra Classic USD is a fallen angel. Formerly known as Terra USD, the stablecoin caused the biggest collapse in the cryptocurrency market when it lost its peg in May. It is estimated that investors lost over $50 billion during its remarkable collapse. At the current price, UST is trading at about 92% below its stability level of $1.
USTC’s recovery has helped push other related cryptocurrencies sharply higher. For example, according to Binance, LUNA Classic has surged by 50% in the past 24 hours and is trading at $0.000138. Similarly, Anchor Protocol, the DeFi platform that provided UST yield, has risen by more than 10%. Mirror Protocol has also jumped.
There are several reasons why the USTC price is bouncing back. First, it is rising as retail traders buy the dip. The overall view among many retail traders is that the coin has become incredibly cheap compared to its intrinsic value.
Second, these traders expect that the stablecoin will achieve its peg in the long term. Finally, the USTC price is soaring as a fear of missing out emerges. Historically, cryptocurrency prices tend to rally simply because the coin is rising.
Will USTC regain its peg?
Still, it will be incredibly difficult for the USTC coin to regain its peg. First, investors have become extremely cautious when buying algorithmic stablecoins. In addition to TerraUSD, other algorithmic coins like DEI, Neutrino, and USDD have lost their peg. As a result, investors have shifted their resources to centralized stablecoins like Tether and USD Coin.
Second, the stablecoin is not backed by anything. Before its collapse, Terra Foundation Guard acquired Bitcoin worth billions of dollars to back the coin. It is still unclear what happened to those reserves. If they are still there, they have lost billions of dollars worth of value since the coin has crashed below $20,000.
Third, UST has lost the trust of investors. Instead of buying, many of them are actually shorting the coin. Therefore, it will be difficult for it to regain its peg. Most importantly, Terra developers are no longer focused on UST.