Jeremy Allaire, CEO of Circle, which issues the second-largest stablecoin USDC, claims to have foreseen Terra and algorithmic stablecoin UST’s collapse six months ago because it was “a house of cards.”
See related article: Terra shuts down indefinitely after coming back online; LUNA, UST still on life support
- “There were two things that surprised me. One was just simply how fast the death spiral happened and how violent of a value destruction it was,” Allaire said in an interview with Protocol. “I was just speechless, just literally had never seen something evaporate that much in 72 hours.”
- Allaire added he was surprised at the high-profile support for Terra and UST despite “clear” risks.
- USDC differs from UST, as it is collateralized by assets, whereas the latter relies on incentive-based algorithms powered by Terra’s cryptocurrency LUNA to maintain its peg to the U.S. dollar.
- UST lost its peg to the greenback last week, resulting in the wipeout of billions of dollars from the Terra ecosystem, dragging the cryptocurrency market down with it.
- Collateralized stablecoins USDT and USDC have mostly maintained their peg to the dollar during the market turmoil, while most algorithmic stablecoins such as DAI also maintained pegs with some turbulence.
- Algorithmic stablecoins represent the “holy grail” of decentralized digital currencies and will be pursued by others, Allaire added.
See related article: No hard fork, governance vote in Kwon’s updated Terra revival proposal