Crypto

The collapse of cryptography: the collapse of Terra is behind the fall of bitcoin

$16.23 trillion flew out of the cryptosphere in seven days. Terra damaged by UST stablecoin lost 90% of its value in 24 hours.

Bitcoin has had a tough week, dropping from $38,860 on May 4 to $29,960 at 02:34 GMT on May 10, a loss of almost $9,000. For the first time since July 2021, its price has fallen below the symbolic bar of $30,000. However, it quickly recovered and traded at $31,770 on the morning of May 11. Bitcoin is not an isolated case, most cryptocurrencies have depreciated in the last 7 days. A total of $16,230 billion has grown over this period, including $145 billion in bitcoin alone. While its rate is growing, the Terra (Luna) cryptocurrency rate is experiencing a collapse.

Loss of trust

One day was enough to see its price crash by 90%. Why ? Due to another cryptocurrency based on the same blockchain, UST. This so-called algorithmic stablecoin is supposed to be equal to the dollar, but not directly pegged to it like many stablecoins. Instead, it relies on a combination of cryptocurrencies. Great idea that was ruined in 24 hours. Used on the Anchor platform to issue loans at exorbitant interest rates (up to 19.5%!), it has lost the confidence of investors who are afraid of not returning their investments. Investors who dumped their UST en masse, sending their value to the very bottom, far from the dollar. Due to the lack of trust in the Terra ecosystem and due to the conversion mechanism between the two cryptocurrencies, Terra was caught up in the fall of UST.

Faced with this collapse, the Luna Foundation Guard, which supports the evolution of the Terra Luna ecosystem, decided to act by liquidating over 42,000 bitcoins (over $1.3 billion) on the night of May 9-10, which greatly contributed to the fall of bitcoin.

While the price of bitcoin rose on May 11, Terra remains in a downward spiral. So much so that the guards of the Moon Foundation are trying to raise almost another billion dollars to stop the fall of UST, according to The Block.

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