So-called stablecoins send a shock wave to the cryptocurrency market, clearing billions of dollars from their value, crashing liquid cryptocurrencies like Bitcoin, and people have lost their savings.
Cryptographic Project Terra’s two major stablecoins fell freely, and there was also an incident called the Ponzi scheme, similar to the collapse of Lehman Brothers that caused the 2008 financial crisis. Stablecoins claims to be a relatively secure haven in the highly volatile crypto market.
They are said to be pegged to fiat currencies and usually maintain a one-to-one peg against the US dollar. However, recent events have proved that they are as volatile as any other cryptocurrency.
However, while Bitcoin remains less than half its record high in 2021, Luna is valued at less than a cent after the dramatic collapse. Bitcoin and Et Cryptocurrency prices have recovered slightly after falling further here. Both have risen by about 7% in the last 24 hours.
Other coins made more profits — XRP rose about 19%, Solana rose 17% and Cardano rose 21%. Shiba Inu and Polka dot were one of the biggest risers, with rises of 29% and 38%, respectively. After a turbulent week and a rough start to 2022, growth will generally give crypto investors some hope.
What is the current crypto price?
The prices of the major coins on Friday afternoon are:
• Bitcoin – $ 30,700 (£ 25,200)
• Ethereum – $ 2,120 (£ 1,740)
• XRP – $ 0.45 (£ 0.37)
• Solana – $ 55.10 (£ 45.20)
• Crypto.com – $ 0.20 (£ 0.16)
• Cardano – $ 0.58 (£ 0.48)
• Avalanche – $ 37.20 (£ 30.50)
• Polka dot – $ 11.70 (£ 9.60)
• Dogecoin – $ 0.094 (£ 0.077)
• Luna – $ 0.0014 (£ 0.0011)
• Shiba Inu – $ 0.000014 (£ 0.000011)
How did it crash?
Developed by Terraform Labs, UST is an algorithmic stablecoin. That is, instead of holding cash or other assets in reserve to back up the token, a complex combination of code and Luna is used to stabilize the process. What happened to Luna? Both Luna and TerraUSD (UST) are native tokens of TerraNetwork, a blockchain-based project developed by TerraLabs in South Korea.
CoinDesk explains: “The Terra blockchain is based on the Cosmos SDK. A framework that allows developers to create custom blockchains and build their own decentralized applications on Terra for different use cases.” Currently, the Terra ecosystem.
Includes over 100 of these natively built projects, including non-alternative token (NFT) collections, decentralized finance (DeFi) platforms, and Web3 applications. ”
Terra’s goal is to be a peer-to-peer electronic cashing system. This is said to be achieved by using “Stablecoin”, a cryptocurrency fixed to real-world currencies.
UST is fixed at US dollars. In other words, one UST is said to be worth about the same as a dollar. Luna plays an important role in this. CoinDesk explains: “Instead of relying on asset reserves to maintain pegs, UST is an algorithmically stabilized coin. It uses a smart contract-based algorithm to burn (permanently destroy) Luna tokens.) To create (create) a new UST token, which involves fixing the price of the UST to $ 1.
In the Terra ecosystem, users can exchange Lina tokens for UST and vice versa. Regardless of the market price of the two tokens at that time, the guaranteed price is $ 1. But this week, Luna plunged as Terra lost its peg to the dollar amid fears of a Fed rate hike.
This sent his prize to the floor. Binance, the major cryptocurrency exchange, temporarily suspended payments at Luna on Wednesday, and the Terra blockchain was officially suspended on Thursday night. Terra said it has taken a step towards “preventing governance attacks.
” The coin may recover, but the situation is very uncertain at this point. Do Kwon, founder of Terraform Labs, Terra creator, said on Tuesday, “We are on the verge of announcing a $ UST recovery plan. I will continue to do it. ”
He added on Wednesday: “The Terra ecosystem is one of the most vibrant in the crypto industry, and hundreds of passionate teams are developing applications that define categories within the system … The return to Terra’s form is noteworthy. Deserves. ”
Will cryptocurrencies recover? Cryptocurrencies are showing signs of recovery as Bitcoin soars above the $ 30,000 line. One factor that can give hope to crypto investors is that big players are starting to join the party.
On Wall Street, companies with dedicated crypto teams include JPMorgan Chase, Morgan Stanley and Goldman Sachs. Meanwhile, mainstream hedge funds managed by Alan Howard and Paul Tudor Jones are pouring billions of dollars into digital currencies.
Some provisions of the Queen’s Speech aim to target people who are using crypto assets to commit fraud but on how to protect individuals who decide to invest in them. Little is said.
A rash from a regulatory gavel could send cryptocurrencies further, but quick decisions can maintain the inherent value that exists. Brian Nick, Nuveen’s Chief Investment Strategist, told Bloomberg: Anything that has a high reputation and has an uncertain or non-existent source of revenue,
“And crypto is definitely highly regarded and has no source of income. This is in very good agreement with what we see in growth stocks and technologies. There is a correlation, but the liquidity of the market is low, so it is clearly more volatile. ”
How dangerous are cryptocurrencies?
People invest at their own risk and cryptocurrencies are not regulated by the UK financial authorities. All crypto investments are dangerous, but Meme coins like the Shiba Inu are particularly volatile and you need to be prepared to lose everything you invest in. The Financial Conduct Authority (FCA) warned in January: “If consumers invest in these types of products, they need to be prepared to lose all their money.”
Need more regulation?
But Terrasaga not only pushed up Bitcoin and ether prices but also pushed up Tether, the world’s largest stablecoin, which is said to have fallen to $ 0.98 on Thursday and returned to $ 1. There is also concern about whether Tether has enough assets to support the intended $ 1 peg. The company stated that all tokens are backed by dollars held in reserves.
However, after reconciling with the Attorney General of New York last year, it became clear that Tether relied on a variety of assets, including commercial paper (a type of unsecured debt), to support the token. There are many questions about how stablecoin is secured and regulations may come soon. • Europe rejects proposals to limit Pow cryptography like Bitcoin but sets draft rules for sustainability
US Treasury Secretary Janet Yellen pointed out TerraUSD at a Senate Banking Commission hearing on Tuesday as evidence of the potential threat to the financial stability of the unregulated cryptocurrency market. “Stablecoin, known as TerraUSD, has been executed and lost its value,” Yellen said. “I think this is a fast-growing product, and I think it shows that there is a risk of financial stability and that a proper framework is needed.” “I lost all my life savings.” ”
But for many who may have lost their lives in this latest story, regulation is too late. Many Reddit users share stories. “I lost all my life savings,” wrote a member of r / TerraLunasub Reddit. “I’ve lost over $450,000 and can’t pay the bank,” another forum user posted.
The Reddit page moderator posted a national helpline forum at the top of the thread. “Apart from the fact that they made a small piece in 2008, what’s important in the American story is that it wasn’t really a small amount, everyone knew it was nonsense.
That’s what Gerald said. “It was obviously nonsense, but crypto is full of deceptive people who are convinced that Ponzinomics has a lot of money, and even if those other fools lose their money, they are rich”
