Cryptocurrency Q&A
What happened with UST?
What happened with UST?
Leonardo
Wed Apr 16 2025
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7
answers
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I would like to know the details and background of what transpired with UST. Could you please provide me with an overview of the events that led to the current situation with UST?
7 answers
GalaxyWhisper
Fri Apr 18 2025
The peg stability of algorithmic stablecoins relies on an arbitrage mechanism. This mechanism works by encouraging traders to buy or sell the stablecoin when it deviates its pegged value, thereby restoring its stability.
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Ilaria
Fri Apr 18 2025
However, for this arbitrage mechanism to function effectively, there must be adequate demand for the balancing coin. The balancing coin is the asset used to adjust the supply of the stablecoin and maintain its peg.
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CryptoAlly
Fri Apr 18 2025
Unfortunately, UST encountered a situation where the demand for the balancing coin was insufficient. This limitation on arbitrage opportunities weakened the mechanism's ability to stabilize the peg.
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Nicolo
Fri Apr 18 2025
UST, an algorithmic stablecoin, faced a critical issue that ultimately led to its collapse.
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CryptoBaroness
Fri Apr 18 2025
This flaw was not unique to UST but was shared by other algorithmic stablecoins before it. The core problem lay in the mechanism designed to maintain peg stability.
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