Terra Stops/Starts Validators Again, LUNA Goes to Zero with TerraUSD Chasing it

The collapse of TerraUSD (UST), an attempt to create an algorithmic stablecoin, and the demise of LUNA has captured the attention of the entire crypto-sphere. Going from billions to almost nothing is a spectacular event. Inevitably there is a pile on of “I told you so” comments plus a lot of navel-gazing. Do Kwon, Terra creator, is being criticized for his cavalier comments just days before the Terra train wreck with one write up describing him as the Elizabeth Holmes of crypto. Pretty harsh.

The demise of UST has compelled competing stablecoins that are actually backed by something besides code to defend their stablecoins.

Jeremy Allaire, CEO of Circle – issuer of USDC, was on CNBC today labeling TerraUSD a house of cards. Simultaneoulsy he called, once again, for greater regulation in the stablecoin sector. USDC has steadfastly held its dollar peg throughout the crypto crisis.

Yesterday, Paolo Ardoino – CTO of Tether (USDT), hosted a Twitter spaces to reassure their community noting that they were guaranteeing $1 to one Tether for registered users. Yesterday, Tether briefly lost its peg but soon recovered. Tether does provide monthy updates on reserves.

Meanwhile, Terra halted validators for a second time. Not a good sign. The Terra team is said to be coming up with plan to reconstitute UST and LUNA.

LUNA, a crypto that is tied to UST, is now effectively at zero having lost all of its value.

$0.00002968

A couple of weeks ago, LUNA was trading at around $100, an incredible amount of value destruction.

TerraUSD is chasing LUNA down, currently trading at around $0.15. I guess the algo-stablecoin concept did not work out so well.

Holders of LUNA and UST have quickly lost everything.

 

The Terra Subreddit has posted suicide help lines for its community as some posters are sharing sad stories about massive losses.

So where to now?

First, Allaire is spot on. Stablecoins MUST be regulated. Stablecoins are foundational to the future of crypto. A lack of trust harms the entire industry. While an algorithmic stablecoin is a cool concept, TerraUSD is now the poster child for a stablecoin gone bad. Terra has destroyed its credibility. Regulators around the world are not ignoring this. New rules and regulations are coming.

 

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