The crypto naysayers are finally getting their day. “Stable” coins are proving to be quite the opposite with TerraUSD collapsing. Bitcoin has acted more like a technology stock than “digital gold”. To top it all off, Coinbase, one of the largest cryptocurrency exchanges, reported a loss that sent the stock tumbling to a fraction of its IPO price.
TerraUSD is a stablecoin previously pegged to the U.S. Dollar. That is to say, at any point, 1 TerraUSD should be worth $1. However, the unique “draw” of Terra’s stablecoin was that it was algorithm based, as opposed to backed by cash reserves. The folks behind TerraUSD also have another crypto coin, Terra (ticker: LUNA), that fell over 99% since the crash.
Tether, the world’s most popular stablecoin, has held on a little better, but still declined much more than expected.
The stablecoin madness was enough to drive crypto markets lower, but the icing on the cake was Coinbase’s earnings report which showed that the company suffered a $430 million net loss. This sent the stock (and cryptocurrency market) further spiraling. At time of writing, the stock is trading more than 80% below its IPO price. To top it off, they announced that in the event of bankruptcy, users of the platform will likely lose all of their crypto.
Bitcoin and Ether, which comprise the largest share of the crypto market, were hit hard. Bitcoin has been trading below $30,000 and Ether below $2,000. Market turmoil has been nearly catastrophic so far for crypto. The faith is shaken and many are looking for a way out. It’ll be interesting to see if the technology can weather the storm of a recession and what changes will come as a result of thousands of investors seeing their money go up in smoke.