The disaster of the Terra (LUNA-USD) network has put the spotlight on rapidly depleting LUNA and TerraUSD (UST-USD) prices. However, there are plenty of other tokens under the Terra umbrella that are seeing turbulence as well. As one of the biggest Terra DeFi platforms, Mirror Protocol (MIR-USD) is seeing price gouges in the wake of the news as well. MIR crypto investors are now wondering what it will take for the token to recover.
Mirror Protocol is a pretty unique DeFi tool native to the Terra network. With it, users can mint synthetic assets called “mirrored assets.” Users mint these assets by collateralizing other assets that the network holds onto. The process is entirely decentralized, using only smart contracts and users themselves to operate. Once one has their synthetic assets, they have access to the full price volatility of the real thing. However, one needn’t worry about actually owning this asset in case of sharp falls in price.
One of the big things to note when it comes to the Mirror Protocol is its linkage to UST. Indeed, synthetic assets users mint on the network primarily trade on the TerraSwap exchange. More importantly, these assets trade in pairs with UST. This means that all traders buying and selling synthetic assets are doing so with the UST stablecoin.
MIR Crypto Falls Due to Mirror’s Reliance on UST Stablecoin
The UST stablecoin is woven directly into the fabric of the MIR crypto ecosystem. So, as Terra and UST tank in price, so too does MIR.
What began as a volatile weekend for Terra’s LUNA and the UST token has turned into full-on bedlam. UST is falling far below its $1 price peg, with prices sinking to 30 cents. Developers are working to restore the cryptos to normal but with little luck. Even after using $1.5 billion in funds to try and stabilize UST prices, the token remains below $1. Moreover, the LUNA crypto has tumbled significantly, with prices falling from $86 to less than $1 in a week.
Being a Terra ecosystem platform, the MIR crypto is dependent on a healthy LUNA and UST in order to function at its highest potential. As UST prices sink below $1, it takes far more UST tokens to buy one of these synthetic assets. So, anybody trading for these assets on TerraSwap right now is paying significantly more or earning significantly less from the volatility. So, it’s no wonder investors are flooding out of the protocol. Users are selling their MIR crypto en masse, leading to a steep decline in prices. Right now, MIR is shaving off 50% of its value, trading at 39 cents.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
