The cryptocurrency market is undergoing a massive crash in value, as multiple coins see their real-world value plummet.
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As a “stablecoin”, Terra USD is supposed to retain its value and remain more stable, but another cryptocurrency it’s tied to, called Luna, dropped in value by over 75 per cent this week, lowering Terra USD’s value as well. Stablecoins can be backed by other assets or real-world commodities, which help then retain their value, with Terra USD’s being very close to the US dollar.
Both Terra USD and Luna are stablecoins on the same blockchain, so when Luna fell, as did Terra USD. Both of these coins are created via an algorithm to retain their value, which helps to stabilise their overall worth.
According to coinmarketcap, Luna has seen its value drop from $84 (approximately £69) to $0.02 as of today. Meanwhile, Terra USD has dropped from $0.99 to the lowest point of $0.3 (on May 11, it has been fluctuating since).
Terra USD’s creator Do Kwon opened his $3.5billion (£2.87billion) reserves of Bitcoin to bring Terra USD back up. Then CoinDesk reported yesterday that Kwon was also apparently behind the failed stablecoin Basis Cash, which he did so under the name “Rick Sanchez”, as in the character from Rick and Morty.
As a result of these crypto stablecoins falling, Bitcoin has gone from being worth around £31,000 on May 4 to around £23,000 today (May 12).
At present, it’s unknown exactly why Luna fell in the first place, with CoinDesk saying it goes back to “a series of major withdrawals from Anchor Protocol”, which is a stablecoin trading market, as well as major Terra USD withdrawals.