"The pressure Terra USD (UST) has been facing the last few days shows no signs of abating" says head of crypto insights at Bybit

During this week we have seen a barrage of news regarding the cryptocurrency Luna and the stablecoin UST on account of both having become catalysts for negative sentiment in the cryptocurrency market.In this sense, following up on this event, which is not at all minor in the crypto world, and has created an interesting precedent, Derek Lim, head of crypto insights at Bybit has shared with us his opinion about the problem.

Also read about other altcoin - http://cryptnews.site/en/

According to Lim, the pressure Terra USD (UST) has been facing the past few days shows no signs of abating, and it has all turned into an unprecedented situation where the market cap of what used to be the third largest stablecoin with over USD 18 billion, has shrunk to just over $600 million according to Coinmarketcap data.

Here's everything you need to know about TerraUSD, Tether and what's going on with other stablecoins
"UST is an algorithmic stablecoin, which means its value is tied to an arbitrage system. In recent days, the system was unable to keep up with the sudden heavy selling pressure, which caused UST's value to become unlinked, resulting in a cascade of liquidations and panic selling," Lim explained.

On the stable coin sector
On the other hand, Lim highlighted the importance of understanding the differences between some of the stablecoins that exist in the market and play a leading role in the world. "Other stablecoins such as USD Coin and Tether (USDT) are collateralized. This means they are backed by a traditional-style treasury, held by a centralized company," Lim explained, claiming that by presenting this model, according to him, there is little risk "of contamination" with Terra's situation, which for now, appears to only be contained in UST, LUNA (Terra's native token) and the projects immediately associated with both.

Tether says they continue to honor verified customer refunds during market volatility.
Regulatory issues
Having said all this, Lim thinks that undoubtedly governments and regulators will and should take an interest in this situation. "I would point out that one of the main concerns that U.S. regulators have made clear in several reports (recent examples are: Money and Payments: The U.S. Dollar in the Age of Digital Transformation and U.S. Department of the Treasury - Report on Stablecoins) is that a bank run on stablecoins could destabilize the broader financial system," he said.

"This incident has shown that a bank run on the third-largest stablecoin by market capitalization has hardly affected the broader cryptomarkets, let alone the S&P and beyond," Lim added.

The recent decoupling of stablecoins from the U.S. dollar is not a "real threat to financial stability," says Janet Yellen
Finally, and on this note, Lim made a recommendation on behalf of Bybit, that investors should be compelled to thoroughly investigate the risks associated with investing in new projects. "Bybit and offers a large library of resources in Bybit Learn to help investors navigate these waters," he mentioned.

Clarification: The information and/or opinions aired in this article do not necessarily represent the views or editorial line of Cointelegraph. The information herein should not be taken as financial advice or investment recommendations. All investments and trading involve risk and it is the responsibility of each individual to do his or her due diligence before making an investment decision.