The current collapse of the cryptocurrency was mainly due to the fall of the “so-called” UST algorithmic stablecoin, which was backed by a cryptocurrency called Luna. The stablecoin is designed to be a stable haven for investors to invest their profits in the face of the volatility of the cryptocurrency market. UST was pegged to the dollar, however it was worth $0.0004 when last checked.
The collapse of a so-called “algorithmic stablecoin” called TerraUSD, also known as UST, has prompted comparisons to the 2008 global financial crisis, as some analysts wonder if the entire crypto ecosystem could risk collapse.
The current collapse of the UST stablecoin in the cryptocurrency world has been compared to the Lehman Brothers bankruptcy on September 15, 2008, which is often referred to as the “Lehman moment”.
The fall of the financial services company was the culmination of the subprime mortgage crisis.
When Lehman Brothers collapsed, its assets exceeded $600 billion and it was the largest bankruptcy filing in US history.
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Ben Marlowe, chief urban columnist for The Daily Telegraph, wrote: “This is the apocalypse for Bitcoin, Ethereum, XRP, Tether, Cardano, Polkadot and all those cryptocurrencies with stupid names and crazy prices. Bloated that defy common sense.”
He added that “extreme volatility exists, but the long-term trajectory of its most popular iteration, Bitcoin, is extremely upward.”
Mr. Marlowe wrote: “From zero price when it was invented in 2009, it hit an all-time high of $68,789 last November.”
Marlow sees rising interest rates as a fundamental factor that could slow bitcoin’s upward trajectory.
He argues that the cryptocurrency could suffer along with the traditional markets as a recession is just around the corner.
He added: “Since the Federal Reserve has begun raising interest rates, money is flowing out of financial markets at an alarming rate.
“Risk assets like tech stocks, high-yield bonds, and now cryptocurrencies are the first to see big outflows.”
After the recent crash, the UK financial regulator, the Financial Conduct Authority (FCA), immediately reminded people: “If you buy crypto assets, you must be prepared to lose all the money invested.”