Crypto Crash Marked by the Reclamation of $7.6B of Tether (USDT) Stablecoins
More and more digital investors are skeptical about the crypto crash, prompting them to cash out all their crypto assets. Since the crypto crisis began, investors have reclaimed funds totaling $7.6 billion from the ‘stablecoin’ Tether, according to new data obtained by the Guardian.
Why this is Important to Investors
Investors and traders who thought they had uncovered a get-rich-quick scam have lost almost all their money, as has happened with every bitcoin disaster. Some hope for Kwon to intervene with a rescue package, while others have completely lost trust in the scheme.
Terra (LUNA) and TerraUSD (UST) are the Terra network’s native tokens. TerraUSD uses algorithms to keep its peg to the US dollar. So, to mint UST, one must burn the same number of LUNA in dollars. It operates in the opposite direction as well. This is how the protocol keeps the UST price stable. Some speculate that if Terra can go from a market cap of more than $45 billion to less than $5 billion in two days, what else in the system is in jeopardy? Could USDC or tether face the same fate?
Presently, some of the most ardent supporters of digital currencies have also started to doubt the sector’s claims. In an interview with the Financial Times, Sam Bankman-Fried, the creator of the crypto exchange FTX, argued that bitcoin has no future as a payments network due to the inefficiencies of the blockchain. This public digital register records its transactions. Instead, he claimed, it could only serve as a gold-like long-term value store.
Billions Wiped off the Crypto Sector
This data indicates that the exchange has paid out almost double its cash holdings to skeptical customers. However, this trend cuts across the entire crypto market as about $600 billion has been sold off, creating turmoil across the markets.
Stablecoins are supposed to hold their value over time. Fiat currencies such as the US dollar, gold, and even other cryptocurrencies back them up. When Terra, another significant Tether competitor, breached its dollar peg, confidence in the stablecoins mechanism was undermined. The demise of Bitcoin had a huge impact on Terra and TerraUSD. Terra’s functioning is to blame for this.
Investors may be concerned about Terra (LUNA) and TerraUSD (UST), which have witnessed severe drops. Who would have guessed that both cryptocurrencies were in the midst of their honeymoon period a month ago, that they would see such a precipitous drop? Investors withdrew their money as the negative sentiment spread across the crypto market, causing Tether (USDT) to lose its peg to the dollar.
This week’s crypto meltdown has been very insightful. Like Terra, even the most popular cryptocurrencies can experience overnight losses and struggle to stay afloat. The concept behind decentralized algorithm stablecoins like TerraUSD is intriguing, but it requires a more effective technique. In times of crises, centralized stablecoins like Tether (USDT), which are frequently chastised for having insufficient cash reserves, appear powerless.
