The first question is: what is the cause of the crypto crash? Many factors play a role in crypto prices, including interest rates, inflation, and government policies. Higher interest rates make savings accounts more attractive, so people may choose to keep their money there. The same goes for falling prices, which can compound the pressure on the market and lead to investors releasing cash. Government action can also contribute to investor pessimism and ultimately lead to a crypto crash.
TerraUSD imploded in May 2022
Almost a year after the TerraUSD project imploded in May, the broader cryptocurrency community has begun to pay closer attention. Leading lawmakers, including Pennsylvania’s Republican Senator Pat Toomey, have called for more regulation. They point to the recent collapse of TerraUSD as evidence that stablecoins should be regulated, just as banks and other financial institutions are. Meanwhile, Circle, a stablecoin provider, recently announced plans to issue a new coin backed by its own reserves.
But despite the high expectations, the sudden collapse of TerraUSD may have killed the Terra blockchain, which is supporting scores of decentralized applications that enable their users to earn yields. This collapse occurred at a time when bitcoin’s value was already in freefall – the crypto market has lost nearly half its value over the past few months. Despite the failure of Terra, the episode serves as a warning to investors who may be thinking of investing in crypto.
TerraUSD is unusable as currency
The cryptocurrency market has going through a rough patch these days, with many failed projects being listed on exchanges. The recent crypto crash is having a ripple effect. This week, the largest cryptocurrency lending network, Celsius Network, halted withdrawals, sparking fears of bankruptcy. Other projects, such as Tezos, have also been listed on exchanges. There are many reasons why the price of these currencies has dropped in recent days, but here are some of the main reasons.
Many investors are questioning whether TerraUSD is a get-rich-quick scheme. Some investors have being left reeling from painful losses and are wondering if this was all a scam. One Massachusetts surgeon lost his family’s nest egg, while a young Ukrainian considered suicide after losing 90% of his savings. Others have thrown in the towel, giving up dreams of starting new businesses or quitting their day jobs.
TerraUSD is unregulated
Investors who invested in TerraUSD are reeking of bitter regret over their losses. This once-bright cryptocurrency had marketed as a blue chip, and investors are now asking if this was a scam or a get-rich-quick scheme. A Massachusetts surgeon lost his family’s nest egg, and a young Ukrainian man considered suicide after losing ninety percent of his savings. Many others have given up their day jobs and dreams of starting a new business. Because they had invested their money in the cryptocurrency.
The update seeks to rebalance the coin’s value, but will it be enough to save it from disaster? If so, it could potentially destabilize other popular stablecoins, including USD Coin, Tether, and USDC-USD. It could also damage crypto’s image, which has already faced a great deal of criticism since the crypto crash earlier this year. However, this may only make investors feel even more hesitant about investing in this new digital currency.
TerraUSD is unprotected
It is hard to explain Terra’s rapid rise without knowing anything about blockchain technology. This is because the boosters of the coin hid behind crypto jargon, making it difficult for anyone to follow their progress. The crash of Terra, however, has shown how unprotected this crypto is in the event of a cryptocurrency crash. Do Kwon, the founder of Terra, is using his position of power to defend the coin, and the entire market has collapsed in the process.
While the Luna Foundation Guard is backing Terra, it is unlikely to protect the cryptocurrency. The Luna Foundation is putting $1.5 billion in bitcoin and UST loans to support the Terra chain. While it is unclear if they’ll sell Bitcoin to protect the UST. The slump in terraUSD has raised concerns about the stability of the stablecoin ecosystem. If Terra’s creators fail to defend its UST. It may be forced to sell bitcoin to maintain the stability of the currency.
