Why Cash Is Better Than Stablecoins: A Lesson from Terra/Luna

1. The Illusion of Stability

Stablecoins are marketed as "digital dollars" with a 1:1 peg to fiat currencies like USD. But this stability is built entirely on trust—trust in algorithms, trust in reserves, and trust in issuers.

UST was an algorithmic stablecoin that maintained its peg via a relationship with its sister token, LUNA. In May 2022, a market shock caused UST to de-peg, and the entire Terra ecosystem collapsed. UST dropped to a few cents, and LUNA's value plummeted to near-zero, erasing tens of billions of dollars in user funds.

What seemed like a safe store of value became worthless in a matter of days.

2. Centralization and Issuer Risk

Even collateralized stablecoins like USDT, USDC, and FDUSD rely on trust in centralized issuers and their reserves. Users have no direct way to verify if every token is actually backed by a real dollar.

If an issuer becomes insolvent or targeted by regulatory actions, your funds can be frozen or lose value.

Example: FDUSD & First Digital Trust

In 2025, Justin Sun announced that First Digital Trust was no longer solvent, recommending users take immediate steps to protect their assets. The result? FDUSD dropped below its peg, sparking fear across the market.

Ironically, Binance's CZ had heavily promoted FDUSD in the past, and many believe he may have been a shadow founder—raising questions about responsibility and ethics.

3. Cash Is Freedom

Cash offers unique advantages that digital assets can’t replicate:

Immune to hacks and smart contract bugs

No reliance on internet or infrastructure

Can’t be frozen or censored by corporations

Universally accepted in most regions

Cash equals sovereignty. It’s the last line of defense in a world increasingly dominated by centralized digital control.

Conclusion

Stablecoins and crypto are innovative tools, but they are not flawless. Terra/Luna’s implosion and the FDUSD drama serve as stark reminders: without paper, there are no guarantees.