Other stablecoins lose their pegs to U.S. dollar following Terra collapse
Updated: 2022-05-17 17:15:33 KST
Following the recent crash of the top ten cryptocurrency TerraUSD, a series of other "algorithmic stablecoins" are also losing their one-to-one peg to the U.S. dollar.
According to CoinMarketCap on Monday, Deus Finance's DEI token became the latest failure, trading at about 60 cents, and had earlier dropped to as low as 52 cents.
Tether, the third biggest cryptocurrency by market cap,also lost its prized pegs to the dollar.
Its market value fell by 9 percent as investors pulled 7 billion dollars.
The plunge spilled over into the wider crypto markets as well.
"The reason this becomes such a problem , and you actually saw this instance this week, is that when the the crypto that is being used in this case, bitcoin is being used to backstop this instrument, becomes incredibly volatile and loses a great deal of value in a very short period of time."
Last week, the stablecoin,TerraUSD, saw its value plummet, wiping billions of dollars from its market cap in just a few days.
Instead of maintaining its value equal to one dollar, it crashed to as low as 11 cents on Monday, while its sister token Terra, which also goes by the ticker "LUNA," fell from an all time high of roughly one-hundred-20 U.S. dollars to a fraction of a cent.
Do Kwon, the co-founder of the Terraform Labs, the company behind TerraUSD and Terra unveiled a plan on Monday to try to revive its troubled blockchain.
He said the rescue plan involves forking the old Terra code and restarting in an updated version of the network.
However, some Crypto investors say they've already lost their life savings.
One such investor in South Korea expressed concern about becoming homeless as the 550-thousand U.S. dollars that he borrowed using his house as collateral, which he subsequently invested in Terra, plunged in value to just 50 dollars.
I can't take it any more. I'm close to breaking down.
U.S. Securities and Exchange Commission Chairman Gary Gensler on Monday sent a stern warning to crypto investors calling it "highly speculative" and urged for more investor protection including market integrity, barring front running customers, and anti-manipulation and fraud.
Eum Ji-young, Arirang News.