Terra’s algorithmic stablecoin TerraUSD, also known as UST, has become the third-biggest stablecoin by market capitalization after surpassing pBinance USD (BUSD). At the current market value, UST is close to overtaking the market’s largest meme-inspired cryptocurrency, Dogecoin (DOGE).
Terra UST’s market cap has increased by 16% in the last 30 days to hit $17.57 billion as of the time of publication, per data from CoinGecko. This value positions UST as the third-largest stablecoin after it surpassed BUSD, which has a slightly lower market cap of $17.46 billion. UST now sits behind stablecoin heavyweights USD Coin (USDC) at $49.9 billion and Tether’s USDT at $82.91 billion.
Also, a further upsurge in the UST market capitalization will likely close the $800 million gap between it and Dogecoin (DOGE).
Nonetheless, while UST has overtook BUSD, it appears to be lagging behind its peers in terms of the trading volume. The stablecoin has been able to register $569.5 million worth of trading volume over the last 24 hours, while BUSD saw a volume of $4.5 billion during the same timeframe. The lackluster trading volume suggests that UST’s growing market capitalization is related more to its reserves and circulation rather than real demand for the token.
Stablecoins like UST are tokens that are designed to keep their peg to a particular fiat currency and are commonly backed by some kind of collateral. Presently, UST maintains its peg to the United States dollar using LUNA — the governance and staking token behind the Terra network. LUNA reserves are burned when UST’s price moves above a dollar. If the UST’s value climbs above $1, for instance, arbitrageurs can jump in and benefit from the inefficiencies while simultaneously ensuring UST keeps its peg stable.
The Luna Foundation Guard (LFG), a Singapore-based non-profit organization supporting the Terra network, has recently shifted toward backing its stablecoin with Bitcoin instead — which is more liquid, and has a more established market than LUNA.