Hopefully you have not invested your life savings into UST. At this time of writing, its value USD 0.44... Which is obviously 56% below its theoritical value. The reasons why it lost its peg from USD have already been explained. However, you may wonder if it is worth buying... or shorting it. Let's have a look.
Can UST & LUNA Crash To Zero?
Short answer: Yes. Why? Because last June, Iron Finance's algorithmic stablecoin, IRON, crashed to zero. If UST crashes to zero, LUNA will likely follow.
Longer answer: FTX CEO Sam Bankman-Fried (SBF) already predicted that a stablecoin backed by volatile assets would not survive a big market crash in an article published by Bloomberg last month:
Question to SBF: What's your take on the rise of either algorithmic or partially algorithmic backed stable coins. One of the most interesting phenomenon happening right now is the rise of Luna and UST and Luna has this Treasury Reserve consisting of a lot of Bitcoin, which seems a little dicey, but some people say any idea of like an algorithmically-backed stable coin is a perpetual motion machine. It's only a matter of time before it fails. Do you believe there can be a truly sort of like decentralized stable coin? What do you make of these projects?
SBF's answer: I think they're really cool. I do have some sympathy to the perpetual motion machine crowd here. They can serve some useful purposes, but if you do zoom out, right, and you say, this is a stable coin, backed by volatile assets, what's gonna happen in a big market move. Right? Like, you know how this plays out.
Everything was already said, right? But some of you did not want to see it. Why? Because it was so cool to earn 20% interest per year passively on US...T.
Now that it has crashed, the question is: What are the other ways to earn passive income?
What Are the Alternatives?
There are at least 3 possible alternatives:
- To invest into another stablecoin: In order to stay on the safe side, we can only recommend to make an in-depth analysis of all the fundamentals before investing into another stablecoin. What guarantees that USDT, USDC, BUSD or DAI will not crash one day? How are they really pegged to USD? Are they really decentralized, or does it depend on one entity and its reserve in which you have to trust? Should you invest into the USDD launched by Justin Sun on Tron (TRX), which seems to be a fork of UST on Terra (LUNA)? What about the USN launched on Near Protocol?
- To swap your coins to fiat currencies: With the current value of cryptos and the inflation on fiat currencies, this may not be the right time for that.
- To invest into staking coins: There are multiple options there. We will focus below on 2 strategies.
- Strategy #1: To stake tokens on DeFi protocols built on EVM (Ethereum Virtual Machine) compatible blockchains, like Avalanche (layer-1), Arbitrum (Ethereum layer-2) or Polygon (Ethereum sidechain). For instance, you can stake GMX or GLP on gmx.io on Avalanche and Arbitrum, or SAND on The Sandbox on Polygon. There are some risks as the crypto market is bearish. However, if you select the best staking protocols and diversify your positions, it is likely that you will improve the total value of your assets in the long term.
- Strategy #2: To buy Proof-of-Stake coins - e.g., SOL, XTZ, ATOM, NEAR or EGLD, which will give you staking rewards. This strategy is risky too since the value of these coins may continue to decline in the short term. However, in the longer term, if you select the right ones, you will win.
Please note: none of the projects or coins mentioned above are financial advices. Please Do Your Own Research before investing your own money.
Below a few referral links to earn free coins...
- Elrond: earn $10 EGLD
- Helium Staking: 10% referral discount
- Helium Rent: earn HNT by renting a shared hotspot