Home Cryptocurrency Stablecoin Terra’s broken dollar hits wider crypto markets

Stablecoin Terra’s broken dollar hits wider crypto markets


HONG KONG – The world’s fourth-largest stablecoin, TerraUSD, lost a third of its value on Tuesday, alarming cryptocurrency investors and partly contributed by bitcoin’s tumble below $30,000 for the first time in 10 months.

TerraUSD on Tuesday broke its 1:1 peg to the dollar and fell as low as $0.67, according to price site Coingecko.

The token shot to prominence earlier this year when non-profit Luna Foundation Guard, the company behind TerraUSD, pledged to accumulate $10 billion worth of bitcoin to support its dollar peg.

Luna Foundation Guard said in a tweet on Monday that it would defend TerraUSD’s dollar peg with $1.5 billion of loans to over-the-counter trading firms, half in bitcoin and half in TerraUSD.

Institutional, sales director at Amber Group, Justin d’Anethan said the use of bitcoin as a reserve had created a vicious cycle for TerraUSD, with selloffs in both tokens drove the other lower.

“Bitcoin is going down as it’s being sold to defend an ecosystem that is suffering, the ecosystem suffering is creating even more panic on (TerraUSD), which is weighing on the Luna token, which requires the foundation to use more reserves to supplement and defend the peg,” he added.

“It’s not a fun situation to be in.”

For the first time since July 2021, Bitcoin fell past $30,000 on Tuesday morning, falling alongside other traditional “risk off” assets such as tech stocks, but also affected by the TerraUSD decline.

Analysts at Singapore’s QCP Capital said in a note that while bitcoin was currently holding at a key support level, “there is material tail risk from the (TerraUSD) de-peg along with macro concerns.”

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