Cryptocurrencies have been under immense pressure after the collapse of a so-called stablecoin called terraUSD.Cryptocurrencies have been under immense pressure after the collapse of a so-called stablecoin called terraUSD.

A controversial stable coin launched just before the collapse of a similar token is struggling to maintain its peg to the U.S. dollar.

On Sunday,USDD plummeted to as low as 93 cents. The creator of the coin has a reserve of digital token worth close to $2 billion.

The situation has led to fears that the same fate may befall USDD as terraUSD did. A growing liquidity crisis in the market has led to a wider sell-off in Cryptocurrencies.

A research analyst at Messari said thatUSDD's "de-peg" was being driven by volatility in the market.

He said that people in need of funds need to quickly leave other positions.

The result is deviation from the peg in the short term with large exits fromUSDD.

Even though there are concerns over a repeat of the Terra saga, experts say it is unlikely sinceUSDD is much smaller in size.

UST began tumbling below $1 before the launch ofUSDD. It has traded below its intended dollar peg for the last week.

Instead of sitting on piles of cash and other cash-like assets, theUSDD runs a complex algorithm to maintain a one-to-one peg to the US dollar.

In order to get around the need to have reserves to back the stable coin, Terra created and destroyed units of UST and luna, a sister coin.

In case investors withdraw their money in droves,USDD has a cache of other digital token to help boost its price. Terra tried to keep its stable coin afloat by buying billions of dollars worth of digital currency.

Monsur Hussain is the senior director of financial institutions at Fitch Ratings.

During times of upheaval, cryptocurrencies are price correlated.

The high interest rates on theirUSDD deposits are unusual. Many investors now say that Anchor's yield of 20% on UST holdings was unsustainable.

The creator of USDD is a man who is trying to compete with ether. Sun has used social media to promote his projects and challenge others.

A Chinese-born businessman has been involved in a lot of publicity stunts. He paid $4.7 million to have lunch with Warren Buffet but then canceled. The lunch was held in 2020

There are some noticeable differences between the two.

Terra had a combined value of $60 billion at their height. Analysts say that it would not have the same effect if it collapsed.

Teander said that the use ofUSDD isn't as widespread as UST was before it was destroyed.

About 10,000 accounts hold the token on the tron network, while just over 100 accounts hold it on the ether network.

When UST/LUNA crashed, there was a degree of fear, but it wouldn't be the same ifUSDD collapsed.

USDD's assets always exceed the number of token in circulation because it is overcollateralized.

Sun's fund has a reserve of more than two billion dollars, which includes the stable coinsUSDC and tether. Roughly $700 million is theUSDD's supply. Teander says that it reduces the chance of a Terra collapse.