Bitcoin came to lose this week the level of 30,000 dollars, its lowest level since November 2020after the stable cryptocurrency (stablecoin) TerraUSD lost its parity with the dollar.
According to EFE, the global market strategist of the multi-asset investment platform eToro, Ben Laidler, considers that the fall that bitcoin has experienced since the beginning of the year worsened “significantly” due to the contagion of TerraUSD, which has lost almost 100% of its value in recent days. Specifically, the asset was trading this Friday afternoon at $0.00005, which contrasts with the $119 it reached on April 5.
Unlike other stablecoins, TerraUSD is not backed by other assets, but rather maintained its parity with the dollar through a complex algorithm linked to Luna, an unbacked cryptocurrency. Julius Baer analyst Sipho Arntzen points out that this crash has had “a strong ripple effect throughout the cryptocurrency ecosystem,” where Many participants question the actual stability of the stablecoins.
TerraUSD co-founder Do Kwon of South Korea tried unsuccessfully to stabilize the decline by tapping into his bitcoin holdings. After his failure, he advanced that he is going to explore options to attract foreign capital and that will seek to “rebuild” this digital currency with a mechanism backed by reserves of an asset instead of the algorithm with which it worked until now.
1/ Dear Terra Community:
— Do Kwon 🌕 (@stablekwon) May 11, 2022
With the fall of the last few days, bitcoin has lost almost 60% from its all-time highs, registered six months ago, when it reached close to 69,000 dollars, and 37% in the year. Along with bitcoin, they have dropped other currencies like Ethereum, the second most used, which has suffered losses of around 60% since its November 2021 highs. For their part, other cryptocurrencies such as Solana, BNB, XRP or Cardano have lost more than half of their value in the last few days alone .
Hard hit for investors
The strong losses experienced in cryptocurrencies have unleashed the panic of thousands of investors, especially those who trusted the Terra Luna project. After the falls, internet forums have been filled with testimonies from citizens lamenting having lost a large part of their assets.
In the Reddit forum dedicated to the Terra cryptocurrency, a user confesses to having lost $450,000: “I can’t pay the bank, I will lose my home soon”. At the same time, and in the face of such a setback, the moderators of the forum have provided telephone numbers of hope.
Other users simply resignedly attend what they consider to be the end of a project to which they have entrusted a large part of their savings: “I’m sorry to say this, but it’s over, guys,” says one Internet user, while another acknowledges that “it’s time to accept the facts” and one investor confesses that “in 8 years, I have never seen a currency die in real time”.
There are also those who try to find an explanation for the crash. There are many, for example, who accuse the BlackRock and Citadel funds of perpetrating a complex strategy to make the value of Terra plummet and at the same time be able to buy cheaper Bitcoin. In this sense, BlackRock’s own spokesman, Logal Kofflet, has been forced to deny the theory: “Rumors that BlackRock had a role in the collapse of Terra are categorically false. In fact, BlackRock “does not trade” with this cryptocurrency, a statement that has also been seconded by Citadel.