In the face of many uncertain factors in the global financial market recently, the price of bitcoin has also ushered in a significant adjustment On May 10, according to coindesk data, bitcoin once fell below the $30000 mark during the day, down 10%.
Reporter / Hou Jiacheng
A bitcoin investor told surging news that the recent decline of bitcoin was mainly due to the US interest rate hike and table contraction. As some traditional financial institutions have entered the bitcoin market in the past two years, bitcoin is just a configurable asset for them. Therefore, when the trend of the global financial market is bad, these funds will throw out bitcoin, causing the bitcoin market to follow the trend of the US stock market.
The investor also said that recently, a large dollar algorithm stabilizing currency ust in the blockchain market encountered a decoupling crisis. Due to the large volume of ust and the third largest stable currency, the temporary decoupling of ust will cause concerns in the blockchain market. At the same time, the project side of ust has reserved billions of dollars of bitcoin as reserves, and the market is also worried that it will sell bitcoin to maintain the stability of UST, which also intensifies the market's concern about the trend of bitcoin.
Gu Yanxi, a researcher in blockchain and encrypted digital asset industry, also told surging news that bitcoin trading is now highly related to the stock market. The degree of correlation reached 90%. In the case of a sharp decline in the stock market, the decline of bitcoin is also normal. In addition, the current sharp decline in ust and Luna has led its foundation to sell a large number of bitcoins it holds, resulting in a sharp decline in bitcoin prices.
What is algorithmic stability
Due to the large fluctuation of cryptocurrency, the industry hopes to anchor the legal currency through the stable currency.
The above investors said that the existing common stable currencies include: mortgage stable currencies with traditional assets as reserves (mainly usdt and usdc) and stable currencies with digital assets as collateral (mainly DAI). The problem with the former is that it is not decentralized enough. For example, in case of war, if the United States wants to freeze the stable currency, it can be achieved through the issuing company. The problem of the latter is that the use efficiency of assets is not high; If you want to issue a stable currency of US $1, you need to mortgage assets much larger than US $1.
Based on the above problems and pain points of various reserve stable currencies. The investor said that the industry tried to stabilize the currency with algorithms to achieve currency value stability and improve capital efficiency at the same time.
"Ust is a relatively new implementation of algorithmic stable currency, and it is also the largest algorithmic stable currency so far." The investor said that the UST project side issued two currencies: one is the stable currency UST, and one dollar anchor. The second is the token of the project, which can fluctuate up and down, called Luna.
The way to stabilize ust is: when ust is greater than US $1, users can cast 1ust with Luna worth US $1, and then destroy Luna. When ust is less than $1, users can destroy 1ust and redeem $1 Luna. Ust is trying to rely on this arbitrage mechanism to achieve stability around us $1.
What kind of decoupling crisis does ust face
The investor said that previously, in order to increase its use, ust's project party gave a large number of deposit subsidies, and the interest on UST was as high as about 20%. However, the psychological pressure of the death cycle of Luna redemption and selling has always been, so ust's project side also purchased billions of dollars of bitcoin as ust's value reserve.
"The crisis of ust this time is that the high interest subsidies given by the government are almost exhausted and can be used for another month. Then a lot of funds begin to withdraw from ust in advance and sell ust in the market. After ust is less than US $1, Luna's market confidence and price also begin to be affected. Therefore, Luna has also fallen sharply recently. Luna's decline, in turn, affects ust's market confidence, so it is a dead cycle." The investor said.
Data source: coinmarketcap
According to coinmarketcap data, the stable currency ust once fell from around us $1 to US $0.68, the largest decline in history.