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Cryptos Heal Their Wounds After Terra Crash


(Boursier.com) — Cryptocurrency prices regained ground on Friday, ending a bloody week marked by the stablecoin crash UST and cryptocurrency Luna, both powered by the Terra blockchain. These two cryptocurrencies lost almost all of their value in a few days, ruining many investors and seriously shaking confidence in cryptocurrencies.

In one week, the plunge in cryptos has thus evaporated no less than 270 billion dollars on the entire virtual currency market, whose capitalization returned to around $ 1.210 billion on Thursday evening, according to the specialized site Coinmarketcap. com

After the collapse of its cryptos, Terra, a blockchain created in 2018, was forced to suspend its operations on Friday morning. However, the other listed blockchains, starting with bitcoin, rebounded, somewhat dispelling fears of systemic contagion. Friday evening, the bitcoinwhich had plunged near $26,000 on Thursday morning, was trading around $30,100 up 5.3% over 24 hours, although still far from its November 2021 record at nearly $69,000. Ethermanaged by the Ethereum blockchain, had risen above $2,000, to $2,058, up 8.6% over 24 hours, after falling below $1,750 on Thursday morning, and the Binance recovered 11.4% to $296.40.

Terra’s UST, an “algorithmic” stablecoin

The main stablecoins other than the UST held up well, acting as a safe haven after the UST’s setbacks: Friday evening, the Tether almost regained parity with the dollar, at $0.9988, after falling to $0.95 on Thursday and theUSD Coin remained fixed on $1, after having even quoted $1.008 in the morning.

Both Tether and USD Coin have demonstrated their strength by guaranteeing to hold as many dollars in reserve as there are stablecoins in circulation. On the other hand, Terra’s UST is one of the so-called “algorithmic” stablecoins, which work with reserves placed in assets other than the underlying to which they are anchored, in this case in the Luna cryptocurrency and a basket of currencies… Algorithms are responsible for maintaining parity with the dollar, but the system was shattered this week amid widespread risk aversion in financial markets.

UST and Luna Terra fell close to zero

The universe of cryptocurrencies thus experienced this week the biggest crash since the appearance of virtual currencies ten years ago, bitcoin having been born in 2009. The alert came from the collapse of the UST, one of the top three stablecoins, cryptocurrencies supposed to remain anchored on a reference asset, in this case the dollar for the UST (US Terra). However, instead of quoting $1, the UST has disconnected from the greenback in recent days, first falling to $0.5 on Wednesday, then to less than $0.10 on Friday before the suspension of the Terra blockchain. .

As for the Luna, it fell close to zero on Thursday, while it was trading at more than $80 a week earlier… The survival of the Terra blockchain now seems compromised, and the South Korean founder of this blockchain, Do Kwon, has remained silent since Wednesday on his Twitter account. He then promised to do everything possible to get out of this crisis.

Washington stresses the need to regulate the sector

The shock wave hit the entire cryptocurrency environment hard, and also found echoes in the fall of the Nasdaq stock index, which is made up of many technology stocks. This new crisis in the crypto market, which has experienced other failures in the past, including the Mt.Gox scandal in 2014, has caused the American authorities to react, starting with Treasury Secretary Janet Yellen, who has initially felt that this crash did not pose a “real threat” to the financial stability of the United States.

During a hearing before the House of Representatives, the Minister of Finance, who also led the Federal Reserve, once again pleaded for increased regulation of digital assets: “we really need a regulatory framework to protect us against the risks” linked in particular to stablecoins, she said.





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