You may have noticed that Terra’s UST stablecoin has completely lost its link with the US dollar. The UST rate should always be at 1 dollar, but is now trading at 0.60 dollar. This initially caused the LUNA token of the Terra protocol to crash from almost 100 dollars to 0.10 dollars. That’s not the only thing, because DeFi protocols associated with UST are also having a hard time. Most have plummeted by 80 percent or more due to the failure of UST.

Drama for DeFi

The worst-performing DeFi projects right now are the protocols running on the Terra ecosystem. These include Anchor Protocol, Astroport and Mars Protocol. All three of these DeFi projects are down 80 percent or more since the crash of UST and the LUNA token. This is because many of the contracts are priced in UST as the main stablecoin. Unfortunately, UST turned out to be a lot less stable for a large group of people than initially thought.

As long as UST continues to trade at this rate and the dollar does not recover, there is little chance that these projects will ever return to their old levels. However, the problem seems to be that trust in UST has now completely disappeared and no one ever dares to burn their hands on this stablecoin again. No matter how well the protocol is put together, confidence in the ability to retain its value is an important property of money.


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