TerraUSD ‘stablecoin’ removed from crypto exchanges | CRYPTOCURRENCIES

TerraUSD, the “algorithmic stablecoin” whose collapse triggered a multi-billion dollar sell-off in crypto markets, has shut down its blockchain and delisted from major exchanges, shutting the project down for good.

But the broader impact of the failure of the project, once valued at more than $40 billion, appears to have been limited.

On Thursday, shockwaves swept through cryptocurrency markets as Tether, the largest stablecoin and a critical part of the digital asset ecosystem, broke its peg to the dollar. However, on Friday, Tether was back within a fraction of one percent of its $1 peg and successfully processed over $3 billion in withdrawals with no issues.

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Bitcoin and ethereum, the two largest cryptocurrencies, have rebounded from their early Thursday lows. Bitcoin is trading at over $30,000 per coin, up from $27,000, while Ethereum is at $2,000, up from $1,700. However, both remain well below where they were trading at the start of the week.

The failure of Terra is likely to topple more dominoes, according to a warning from Fitch Ratings. “The Terra peg failure has shocked the decentralized finance sector, with a key savings and loan protocol, Anchor, seeing massive liquidation of UST-backed loans and the price of other crypto tokens taking a hit as well,” he said the company.

“This has led to more sell-off triggers across the ecosystem…Bouts of volatility will likely continue as the crypto sector digests the repercussions of the UST parity failure.”

Stablecoins are meant to hold a fixed value, typically $1 per coin. But some, like Terra, are “algorithmic” stablecoins, maintaining that price through a promise to print or destroy currency to meet demand. That approach has been criticized for sharing elements with a Ponzi scheme, which requires regular inflows of new capital to maintain parity and is prone to a “death spiral” if investors lose confidence.

That death spiral has rendered the two Terra tokens worthless. UST, the stablecoin, is now trading below 20¢, far from its parity with the dollar; and Luna, the free-floating token that is supposed to provide the backing for algorithmic stability, has fallen from $81 per coin seven days ago to $0.00004 per coin.

The death spiral worsened on Friday morning, when the key players behind Terra agreed to disable the blockchain that makes the system work, leaving the remaining holders unable to receive rewards for participating. At the same time, crypto exchanges including Binance and FTX moved to limit trading of the token, in an effort to protect naive investors from further losses.

That was too late for some. Gaming influencer KSI bought Luna worth more than $3 million on Tuesday, saying he had “always been a risk taker… I saw an opportunity and had to take it.” Her possessions are now worth less than $10.

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Despite the collapse, the UK government says its goal is to make stablecoins a legal part of the country’s payments infrastructure.

“Our ambition is to make Britain a global hub for crypto asset technology,” a Treasury spokesperson said, “by creating a regulatory environment in which businesses can invest, innovate and grow, while maintaining the financial stability and regulatory standards to ensure that people can use new technologies reliably and safely.

“We are delivering on this ambition: consulting on a future regulatory regime for crypto assets, legislating to bring stablecoins into payment regulation, and exploring ways to improve the competitiveness of the UK tax system to encourage further development of the crypto asset market. . in the United Kingdom.”

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