How Will UST Crash Impact Other Stablecoins?

Asset-backed stablecoins likely won’t be hurt by Terra situation, crypto execs say

article-image

Blockworks Exclusive Art by Axel Rangel

share

key takeaways

  • Tether (USDT) and USD Coin (USDC) remained at right around $1 Wednesday afternoon
  • Some may be tempted to sell or short other algorithmic stablecoins, Trakx CEO says

Though Terra USD (UST) lost its peg to the dollar over the last few days, crypto executives said not all stablecoins are destined for the same fate.

Brad Yasar, CEO of DeFi platform EQIFI, noted that he does not believe the stablecoin market as a whole will suffer.

The prices of the largest stablecoin, Tether (USDT), and second-largest, USD Coin (USDC), remained at right around $1 Wednesday afternoon. Both are asset-backed, unlike UST, which attempts to maintain its stability by creating or destroying the supply of UST through a swap with the Terra blockchain’s native token LUNA.

“The asset-backed stablecoins — as long as their reserves match the number of coins in circulation — are not prone to de-pegging by market movements,” Yasar said. “Algorithmic stablecoins that are not asset-backed so far have been de-pegged by violent market movements.”

UST, which now has a market capitalization of roughly $13.95 billion, was priced at about $0.68 at 2:30 pm ET Wednesday, according to data compiled by Terra and Flipside Crypto. LUNA was down 94% in the past 24 hours at that time.

About $350 million in UST was swapped for USDT using the Curve protocol, which left more UST available compared to other stablecoins, lowering its value, according to a blog by Grayscale Investments. 

The remaining portion of UST withdrawn from Anchor protocol was sold on centralized exchanges, driving down the value on those markets as well.

Terra founder Do Kwon said in a Twitter thread Wednesday that the only path forward will be to absorb the stablecoin supply that wants to exit before UST can start to repeg. 

“Terra’s return to form will be a sight to behold,” Kwon said.

A spokesperson for Tether noted that USDT is the most liquid stablecoin in the market, adding that the company does not believe UST’s situation means anything for the centralized stablecoin market.

“Tether has withstood multiple ‘black swan’ events in cryptocurrency,” the representative told Blockworks in an email. “The collapse of the UST peg is one of those events. We’re proud to say that the 1:1 peg to the dollar on USDT has been successfully maintained, and Tether has never once failed to honor a redemption request from a verified user.”

Tether’s volume in the past 24 hours was about $140 billion, as of 2:30 pm ET.

Gabor Gurbacs, director of digital asset strategy at fund group VanEck, said in a tweet that bitcoin and USDT are the top reliable reserve assets for the crypto space.

“Tether markets, redemptions, trading, order-books and the peg look orderly and healthy,” he told Blockworks. “I do not believe that Tether should be compared to UST.”

Ryan Shea, a crypto economist at crypto index trading platform Trakx, said the stablecoin market should be “a zero-sum game.” He noted that UST’s dramatic price drop will likely create a shift away from algorithmic stablecoins to collateralized stablecoins as the market loses faith in the former’s stability mechanisms.

“Some people might be tempted also to get rid of or even short other algorithmic stablecoins,” Shea said. “It may benefit collateralized stablecoins and/or centralized exchanges.”

Several new algorithmic stablecoins have been introduced into the market that mirror the seigniorage model used by UST, such as USN issued on the Near protocol, but the market cap of these is a fraction of UST’s. The closest parallel is Waves’ Neutrino USD (USDN) with a market cap of $830 million, which suffered a de-pegging of its own in April and is down about 9% over the past 24 hours, trading at $0.88 as of 2:30 pm ET.

Mark Basa, director at HOKK Finance, argued that stablecoins are the entry point for late adopters of the crypto space.

“I think this will have a ripple effect against other stablecoins, or at least push towards the adoption of 1:1 backers like USDC,” he said. “The stablecoin market will react to this player leaving the space, and now more trusted and asset-backed coins and tokens can enter.”


Get the news in your inbox. Explore Blockworks newsletters:

  • Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
  • Empire: Start your morning with the top news and analysis to inform your day in crypto.
  • Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
  • 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
  • Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
  • The Drop: For crypto collectors and traders, covering apps, games, memes and more.
  • Supply Shock: Tracking Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.
Tags

Upcoming Events

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates.jpg

Research

Bluefin possibly stands at an inflection point. The token is near an all-time low yet the protocol’s spot volume market share and derivatives exchange usage have been increasing month over month since its November launch. Given its current market position and the upcoming upgrades (for both Bluefin and SUI), there may be upside potential before the increased supply growth in December. However, strong opposition from existing competitors (like Cetus and Suilend), as well as new entrants (like Aftermath), pose key challenges to Bluefin’s medium-term success.

article-image

Top Committee Democrat Sen. Elizabeth Warren in her opening statement accused Atkins of “helping billionaire CEOs like Sam Bankman-Fried”

article-image

Introducing garbled circuits for enhanced privacy and regulatory compliance

article-image

Ross Ulbricht was a freedom maximalist building freedom tech, powered by Bitcoin

article-image

Solana validators can reap benefits including payments, votes and community clout

article-image

Sponsored

WalletConnect is cementing itself as the essential connectivity layer, ensuring wallets remain the entry point for billions of users

article-image

According to a legal filing, Galaxy Digital helped boost the price of LUNA while quietly selling its tokens