A sell-off in a cryptocurrency believed to be pegged at $1 accelerated on Wednesday, sending its price below a quarter of that value.
TerraUSD was trading at 24 cents on Wednesday, according to data from CoinDesk, wiping out more than $10 billion in market capitalization in the space of a few hours. Called stablecoins, this cryptocurrency has gained favor among traders for being part of a crypto universe revered for its stability.
While the most popular stablecoins maintain their level with assets including debt and dollar cash, TerraUSD is known as an algorithmically stable currency that relies on financial engineering to stay relevant. associated with the dollar.
The TerraUSD peg breakout began over the weekend with a series of large TerraUSD withdrawals from Anchor Protocol, a type of decentralized banking for crypto investors.
Anchor Protocol is built on the technology of the same Terra blockchain network that TerraUSD is based on. It has been a major factor in the growth of stablecoins in recent months by allowing crypto investors to earn returns of almost 20% annually by lending out their TerraUSD holdings.
At the same time, TerraUSD is also sold for other stable currencies backed by traditional assets through various liquidity pools that contribute to the stability of the exchange rate, as well as through exchanges. electronic money. The sudden outflow of money caused some traders to start selling TerraUSD and its sister coin, Luna.
TerraUSD’s drop to 24 cents marks a 70% drop from its value 24 hours earlier, according to CoinDesk. Luna traded at $4.62 – down 85% year-on-year.
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https://www.wsj.com/articles/cryptocurrency-terrausd-plunges-as-investors-bail-11652256429?mod=rss_markets_main Cryptocurrency TerraUSD Plunges as Investors Bail