Benzinga - In May 2022, the stablecoin TerraClassicUSD (USTC) plummeted over 99.9% because of a liquidity run after the token slightly lost its $1 peg.
The token used an algorithm to continuously buy and sell USTC as well as its native token TerraLuna (LUNA). But the algorithm was not prepared to handle such high volumes and malfunctioned. This caused the price to go from $1 to well below 1 cent.
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USTC was seemingly a complete failure that many people invested a lot of money in. At its peak, USTC had a market cap of nearly $20 billion. Some investors cut their losses and sold their positions, while others were forced to hold as they could not realize the losses.
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Many investors are still holding USTC and wondering whether the price can make it back to its original peg of $1. Though the $1 target may seem like a far-off goal, there are a few events that give the idea some life.
Over the past several weeks, USTC has gone from around $0.015 to $0.04 and is up over 200% in the past month. This price increase comes after six months of minimal price movements.
The first event triggering this price increase involves the crypto trading platform Binance. It began offering perpetual derivative contracts on the token. This allows investors to gain up to 50 times leverage on the token. This high-stakes method of trading, typically reserved for the most robust cryptocurrencies, brought attention back to the token.
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Another catalyst was talks of a USTC revamp. This would overhaul the algorithmic system and replace it with a Bitcoin-backed minting system. Theoretically, this would bring much-needed stabilization to the token and allow the company to repeg the price at $1. Although the plans are only in the discussion phase, investors are excited about the potential of revamping the system.
USTC is an example of seemingly strong projects having weaknesses. While getting the token back to the $1 level may be wishful thinking, many people in the crypto community believe it's a possibility.
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