The crypto world has suffered a catastrophic hit today; the blow came after the terraUSD, one of the topmost algorithmic stablecoins in the crypto market, collapsed. Terra is designed to trade 1:1 with the US dollar; but, after being at around $1 for about a year, yesterday the coin lost its peg to the US dollar, dropping to 29 cents and wreaking havoc throughout the crypto market.
Unquestionably, Terra’s meltdown heavily affected many cryptocurrencies – but the largest impact has been on the biggest cryptocurrency in the world: Bitcoin. Over the last 24 hours, the price per bitcoin has dropped to less than $27,000, reaching its lowest level since before the crypto boom in late 2020. Bitcoin’s overnight collapse led to other cryptocurrencies crashing down as well. Ethereum dropped more than 20 percent since yesterday, whereas Solana, Avalanche, Cardano, Dogecoin, XRP, Polkadot, and STEPN suffered even sharper losses, down by 25% to 35%.
Though Terra’s collapse was predominantly the reason why markets went through hell today – with approximately $1 trillion being wiped out from the crypto market just this week – as venture associate at AscendEx states, “the crypto market has been under pressure for some time now… The Fed keeps hiking, so equities keep going down and crypto’s been going down along with it.” Indeed, Bitcoin is down more than 45 percent this year alone, whereas, compared to November 2021 when Bitcoin had reached its peak price of $69,000, the digital currency has basically lost two-thirds of its value.
Overall, the Terra crash and the subsequent drop in the price of Bitcoin and other cryptocurrencies have caused several investors to complain about losing their life savings. Following news of the meltdown, one member of the TerraLuna sub-Reddit wrote on the forum claiming that they have “lost over $450,000”, while another investor said: “I should’ve cashed out when it was $100, then I would have been up $25,000. But I got greedy hoping to get more money so I can at least afford a down-payment for a house for my family.” The forum also lists national helpline numbers for investors who have been heavily affected and feel the need to talk to someone.
Nevertheless, despite the mayhem, the disappointment, and the stress that the crypto market has been going through this week, some experts do not believe that the broader market will be heavily damaged from the sell-off. “The reality is these instruments make up really a fraction of the economy,” the R3 Managing Director, and former COO of the U.S. Commodity Future Trading Commission, Charley Cooper said, before adding that “Although there are definitely trading firms that are losing a lot of money and that have money at stake in the outcome of this particular event, I don’t believe at this time it will pose a systemic risk to the broader system.”
Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.
