Speaking of USTC, we have to mention its sister token, LUNC. USTC was once pegged to $1, but now? 1 USDT can be exchanged for ten thousand USTC—that’s a brutal drop.

The way these two tokens work is almost surreal: both use an unlimited minting mechanism. In theory, 100 LUNC can be swapped 1:1 for 100 USTC, and vice versa. Sounds great, right? Buy and the price goes up, then buy more as it rises, like riding a rocket straight to the moon.

But here’s the problem—when everyone wants to get out, and a bank run starts, USTC simply can’t be redeemed for an equivalent amount of LUNC. That’s when the death spiral begins: the price crash triggers more minting, more minting accelerates the crash, and prices plummet until you start questioning everything. This is the most dangerous aspect of algorithmic stablecoins—once confidence collapses, the spiral heads straight to rock bottom.