By 
The so-called algorithmic stablecoin TerraUSD fell as low as 30 cents on the dollar on Wednesday, demonstrating in real-time the difficulties the cryptocurrency community will have in providing an alternative to the traditional financial system.
TerraUSD is a coin backed by another crypto, called Luna. The way it’s supposed to work is that when TerraUSD, or UST as it’s called, falls below $1, traders can exchange it for the equivalent of $1 of Luna.
But Luna
LUNAUSD,
-70.23%
also is in freefall.
Related: What is an algorithmic stablecoin? Why is Terra in the news? Here’s what investors need to know.
Coinmarketcap
The Luna Foundation Guard earlier this week said it lent $1.5 billion, half in bitcoin, to help protect the peg.
Other stablecoins, such as Tether
USDTUSD,
and USD Coin
USDCUSD,
,
have held their value.
Treasury Secretary Janet Yellen on Tuesday warned about the threat to financial stability from the unregulated cryptocurrency markets. “A stablecoin known as TerraUSD experienced a run and declined in value,” Yellen said. “I think that simply illustrates that this is a rapidly growing product, and that there are risks to financial stability, and we need a framework that’s appropriate.”
The largest crypto by market cap, bitcoin
BTCUSD,
-0.42%,
slipped 1% on Thursday, and has dropped 34% this year.
Comments