May 17, 2022

Hardwood Paroxysm

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-85% in one day and -95% in one week

Values Bitcoin It fell below $30,000 for the first time this week. This is even the minimum of June 2021. The higher-than-expected inflation data for April added new pressure on cryptocurrencies, which are already under pressure from the free fall of moon and UST, two cryptocurrencies for the blockchain platform ground. The second is also in sharp decline Cryptocurrency In terms of market capitalization, or Ethereum, which is worth about $2,350, down 7.5%.

The decentralized and algorithmic stablecoin TerraUSD, or UST, lost its peg to the US dollar at the end of last week and fell to 26 cents this morning. Luna, which recently topped $114, is now worth $4.77 after dropping below $1.

Bitcoin in Free Fall: That’s Why They Are No Longer Withdrawing Cryptocurrencies

Luna, what happened

This morning -33%, -85% in the last 24 hours, -95% in the last week of Luna’s value and all the portfolios that invested. The stablecoin of Terra Group (UST) collapsed in the same way: -60% within a day, -46% in the morning alone, dropping to $0.3 and thus far from par. Last April 5, Luna was worth $119, today 5 and 2 years ago it was worth 0.12.

Usually stablecoins are backed by a reserve asset, for example the dollar, in the case of Tether (USDT) and USD Coin (USDC), just to name the two most important. On the other hand, the FSO does not expect reserves, but it maintains (maintained) a 1:1 ratio with the dollar thanks to Luna, its governance token. To create more FSO, you must burn moonVice versa.

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Then Do Kwon, the man who created Terra, decided to support “linking” terrestrial vaults to bitcoin as well. The resulting bitcoin sale to buy back ground treasuries had a disastrous effect on the cryptocurrency market as the price of bitcoin also fell. Just a few days ago, TerraUSD was among the top 10 cryptocurrencies by market capitalization. Yesterday, US Treasury Secretary Janet Yellen also mentioned TerraUSD depegging during a Senate hearing: “Stablecoins pose financial stability risks and need regulation.” Meanwhile, on Wall Street, Coinbase, the number one cryptocurrency exchange in the US, lost 22%, also due to a disappointing quarterly report.

Bitcoin crash

TerraUSD burns 70% of its value in 24 hours and floods the cryptocurrency funding, bringing doubts about its sustainability back to the fore. Bitcoin pushes a steep price, dropping below $29,000, the lowest since January 2021. The algorithmic stablecoin, dear to many investors, has been considered an experiment that combines math and software to create a digital currency that behaves like a collapsed dollar for reasons that aren’t, but it’s clear. , as it dropped to 23 cents, a far cry from the one dollar value it should be associated with. “I understand that the past 72 hours have been difficult for all of you. Know that I am determined to work with each and every one of you to get through the crisis,” says Do Kwon, the South Korean developer who created the stablecoin who is now having a hard time gaining the trust of major investors.

The hype comes at a time of nervousness in the market and unleashing the girl of cryptocurrency, which is also the partner of Coinbase’s disappointing quarterly report. The largest cryptocurrency exchange in the United States closed the first quarter below analyst expectations due to a decline in the number of users. The losses amounted to 429.7 million dollars and revenues 1.2 billion dollars. Even more alarming, however, is the communication with the company’s Sec that specifies that users of the crypto-asset have no protection in the event of bankruptcy. In itself, there is nothing new given that the lack of guarantees provided by the current regulations, but the mere ratification of them in writing sparked panic, indicating that the clarification was linked to a real risk of bankruptcy for the company. “There is no risk of bankruptcy, but we have included a new risk factor based on Securities and Exchange Commission requirements,” CEO Brian Armstrong says quickly in his explanation. However, his words are not reassuring, and Coinbase shares closed down 26.40%. Bitcoin is also heavy, losing 8.7% at $28,300. The cryptocurrency has been on the decline for several sessions now and has burned more than 50% of its value compared to last year’s peak.

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