The present crypto-crash has been largely attributed to the autumn of the ‘so-called’ algorithmic stablecoin UST, which was backed by a cryptocurrency referred to as Luna. A stablecoin is meant to be a secure protected haven for traders to park their earnings amid the volatility of the cryptocurrency market. UST was pegged to the greenback, nonetheless, finally examine, it was price $0.0004.
The collapse of the so-called “algorithmic stablecoin” called TerraUSD, also known as UST, has evoked comparisons to the 2008 Global Financial Crisis, as some analysts wonder whether the entire crypto ecosystem could be at risk of imploding.
The current UST stablecoin crash in the cryptocurrency world has been likened to the bankruptcy of Lehman Brothers on September 15, 2008, oft referred to as the “Lehman second”.
The fall of the financial services firm was the climax of the subprime mortgage crisis.
When Lehman Brothers fell it was holding over $600 billion in assets and was the largest bankruptcy filing in US history.
Ben Marlow, Chief City Commentator at the Daily Telegraph, wrote: “It’s doomsday for Bitcoin, Ethereum, XRP, Tether, Cardano, Polkadot and all these different cryptocurrencies with foolish names and wildly inflated costs that defy all monetary widespread sense.”
He added that “excessive volatility exists however the long-term trajectory of its hottest iteration – Bitcoin – is overwhelmingly upwards”.
Mr Marlow wrote: “From a value of zero when it was invented in 2009, it peaked at an all-time excessive of $68,789 final November.”
Mr Marlow considers the hike in interest rate as being a fundamental that could slow bitcoin’s upward trajectory.
He argues that the cryptocurrency could suffer along with traditional markets as a recession is now firmly on the cards.
He added: “Because the Federal Reserve has begun to boost rates of interest, cash is exiting the monetary markets at scary velocity.
“Risky assets such as tech stocks, high-yield bonds and now crypto are the first to see significant outflows.”
After the current crash, the UK’s monetary regulator, the Monetary Conduct Authority, FCA, was fast to remind individuals: “If you buy crypto assets you should be prepared to lose all the money you invest.”