Understanding TerraClassicUSD (USTC): overview of cryptocurrencies
TerraClassicUSD, or more commonly known as USTC, is a prominent player in the field of cryptocurrencies with a reputation full of intrigue. USTC, which operates on the Terra Classic blockchain (LUNC), was initially designed to maintain a 1:1 ratio with the US dollar, fulfilling the role of an algorithmic stablecoin.
From stability to volatility: the change in the trading value of USTC
Despite its intended function as a stablecoin, the performance of USTC has experienced significant fluctuations, particularly since the collapse of its predecessor, UST, in May 2022. Instead of maintaining its designed value, its trading value fluctuates primarily around a handful of cents, leading to a loss of most of the defining characteristics of a stablecoin.
The unique mechanism of USTC
Unlike asset-backed stablecoins like USDT or USDC, USTC leveraged a different method to maintain its peg to the dollar. The underlying method employed a burning and minting mechanism to dynamically adjust the price of the digital currency.
UST: The predecessor of USTC
UST, the precursor to USTC, had effectively maintained its peg to the dollar for over eighteen months until May 2022. The key to such coherence lay in Terra's novel approach: a system that burned and minted in synergy with its native governance token, LUNA.
For example, to generate UST, individuals had to buy it using LUNA, which would subsequently be 'burned' or removed from the circulation pool. The opposite was also true: to acquire more LUNA, a minting process was used, paid with UST and subsequent 'burning' of UST.
The automatic exchange mechanism adopted by Terra facilitated its smooth operations, continuously minting and burning LUNA and UST to maintain the UST peg whenever deviations from the dollar occurred.
The resurgence: USTC after May 2022
Following the dramatic fall of UST and the subsequent rebirth under the label of USTC in May 2022, the previously functional minting and burning strategy was disabled. However, this disruption in the mechanism has not significantly adjusted public perception, as many accredited online publications still classify USTC as an algorithmic stablecoin, resulting in a somewhat misleading description of its current state in the cryptocurrency space.
The evolution of TerraUSD (UST) to TerraClassicUSD (USTC)
In the dynamic world of blockchain, in 2018 a revolutionary idea was presented by a pair of South Korean innovators, Do Kwon and Daniel Shin. They introduced Terra, a blockchain platform designed to provide stablecoins with algorithmic pegging rates. A year later, the platform launched its mainnet to great applause. In September 2020, Terra launched its first algorithmic stablecoin, TerraUSD (UST), pegged to the US dollar. The rate of this stablecoin was maintained stable through a UST/LUNA exchange mechanism.
Concerns about the viability of the Terra model
As early as 2018, even before the mainnet was active, several industry analysts raised doubts about the Terra model. Cyrus Younessi, an industry expert, raised concerns about a significant failure in the UST peg maintenance system. He pointed out that the stability of the currency depended on the LUNA token to correct any drastic deviation from the $1 parity caused by panic. As Younessi warned, if a wave of panic seized UST investors, it would not spare LUNA either, setting the stage for mutual havoc.
The precipitous decline of UST and LUNA
The grim prophecies came true in May 2022, when the values of UST and LUNA plummeted to near extinction. At the beginning of the month, UST was valued as any solid stablecoin should be pegged to the dollar: $1. LUNA, at that time, was trading above $80. The fate of both tokens took a dramatic turn for the worse in mid-May, when their values fell to less than a cent, leaving them essentially worthless.
From Terra to Terra Classic
In the wake of this severe recession, the Terra blockchain underwent a renaming exercise to emerge as Terra Classic. Simultaneously, UST and LUNA rebranded their tickers as USTC and LUNC respectively. However, the stablecoin peg maintenance function based on mint/burn swaps was suspended, effectively relegating USTC to the status of an algorithmic stablecoin in name only. The token now has a variable, and sometimes erratic, rate influenced directly by market forces.
Despite the turbulent journey, it would be wrong to dismiss USTC as an asset lacking potential. Despite the adversities, its unpredictable market dynamics could still present a tempting prospect for some investors.
Understanding the supply dynamics of the cryptocurrency USTC
In the complicated world of cryptocurrencies, supply trends often play a crucial role in shaping the value of a specific token. Reflecting on the transition from UST to USTC, the cryptocurrency token experienced some stabilization in its supply flow. This stabilization was primarily due to the decision to suspend the perpetual minting and burning exercise.
Actions taken to strengthen the stability of USTC
Halting new minting of USTC
In an intriguing turn of events, during September 2023, the Terra community made an exceptional decision. They unanimously voted to suspend the generation of new USTC tokens. The main premise behind this decision was to improve the prospects for the token to reach parity with the US dollar.
Burn events suggested by USTC
Adding more credibility to the strategic options for the stability of USTC, the community not only supported the suspension of new token production but also backed proposals for burn events in the previous months. These actions signified a collective effort to regulate the supply of the token.
Current status of USTC supply
As we conclude our exploration of the supply dynamics of USTC, as of December 4, 2023, the total supply of USTC has increased to approximately 9.8 billion. At the same time, the volume of tokens in circulation has increased to approximately 9 billion, presenting a revealing view of the state of this attractive cryptocurrency.
Forecast of future price for TerraClassicUSD (USTC)
By the end of November 2023, the former stablecoin of TerraClassic USD (USTC) recorded a value of around $0.01. This was a price point at which USTC had generally regained its balance after the upheaval of May 2022. However, a radical price increase recently occurred, and the value of the coin jumped to an impressive $0.065 by December 4, 2023. The graphical representation below shows the price progress of USTC over the two-week span ending December 4, 2023, highlighting a significant price increase triggered on November 26, 2023.
The status of USTC among the major cryptocurrency price predictors
Although USTC is categorically treated as a stablecoin, at least from a historical perspective, it is important to note that many leading cryptocurrency prediction websites refrain from making long-term projections about it. The few platforms that present long-term forecasts for this token do not anticipate that it will reach parity with the US dollar.
For example, the cryptocurrency forecasting platform, DigitalCoinPrice, anticipates that USTC will maintain its price in the range of $0.064 even until 2030. In a contrasting perspective, CoinCodex strikes a sensitive chord regarding USTC's long-term prospects, forecasting that its value will rise to $0.1198 by the year 2030.
Could USTC regain its $1 value?
The sustained increase in the price of USTC, combined with recent restrictions imposed on its distribution by the Terra Classic governance community, has rekindled optimism that it could regain its parity with the dollar in the foreseeable future. After the catastrophic events that befell the original Terra blockchain, rumors have emerged that USTC could approach $1 once again, generating considerable debate. We believe that the backdrop of these discussions is less rooted in rationality and more driven by emotional fervor.
The impact of stopping the creation of USTC and reducing its circulation
The fervor and price escalation are primarily driven by decisions to cease the production of USTC and decrease its circulation by burning part of it. However, if USTC ever wants to reach the milestone of $1, an extraordinary event must occur.
Possibility of a gigantic capital injection
This unprecedented fact could possibly take the form of a colossal capital injection (potentially worth several billion dollars) into USTC. Nevertheless, it is unlikely that many investors would be willing to venture into such a bold measure, especially given the current difficulties facing the Terra Classic network and its associated tokens, USTC and LUNC.
Should I consider investing in USTC?
Although reaching parity with the dollar may seem challenging for USTC, this affirmative axiom does not imply that the investment potential in the token is absent. A considerable number of analysts and cryptocurrency investors have had a morbid obsession with the issue of parity and have therefore overlooked the overall growth prospects that USTC holds.
The impressive progress of USTC
USTC reported a notable increase of 400% in the short period from November 25 to December 4, 2023. It is crucial to note that this enormous progression was not solely the result of exuberant enthusiasm; USTC dismissed the chimerical nature of a purely speculative investment.
Factors favoring further price escalation
Several considerations could reinforce the future price advance of USTC. Predominantly, USTC could be an attractive asset for those short-term and potentially medium-term cryptocurrency investors who are not intimidated by high-risk investments.
USTC: risk and reward
Currently, amid the turmoil and substantial growth surrounding it, USTC presents significant risks and promising investment returns.
Trading USTC: The platform
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Farewell thoughts
As seen in early December, the notable increase in USTC is still in progress. This upward trend is unlocking enormous profit potential for traders who enjoy the short-term speculation that involves substantial risk. However, for long-term market participants, the future seems somewhat uncertain. The current rally could continue to gain momentum for perhaps weeks or months, or it could suddenly lose strength at the same rapid pace it gained initially. While the possibility of USTC achieving parity with the US dollar seems marginal for now, the prospect of significant positive returns in the future is certainly plausible.
An uplifting factor for Terra Classic
A particularly encouraging element related to the Terra Classic initiative is the renewed and serious consideration it has received from the cryptocurrency market. This is the first time since the disaster of May 2022. In fact, both USTC and the Terra Classic blockchain have simultaneously regained their position in the spotlight.
