(Paris) The terra, a so-called stable cryptocurrency, supposed to be pegged to the US dollar, lost more than half of its value in 24 hours, sowing a wind of panic in an already feverish crypto-asset market.
Posted at 8:22 p.m.
According to the specialized site CoinGecko, the terra (UST), normally close to 1 dollar, fell on Wednesday to around 30 cents. It was trading in the early afternoon at 43 cents, down 53.5% from its price the day before.
In principle, the price of a so-called stable cryptocurrency is linked to that of a traditional currency, which guarantees investors a certain durability in the very volatile world of cryptocurrencies.
But the stability of some of these cryptocurrencies is not ensured by currency reserves, but by an algorithm that makes arbitrages based on the supply and demand of another cryptocurrency.
This is the case of terra, which is backed by the cryptoasset developed by the Luna Foundation Guard, an organization that says it wants to “promote a decentralized economy”.
However, this digital token has itself tumbled since the start of the week under the impact of a wave of liquidations. It sank almost 95% on Wednesday, to $1.69, according to CoinGecko.
Luna Foundation Guard announced on Monday that it has deployed the equivalent of $1.5 billion in bitcoins and terras to secure the stablecoin’s parity with the dollar with no immediate effect.
The creator of the terra, Do Kwon, assured Tuesday on Twitter that he was about to present a recovery plan for the cryptocurrency, but the price of the currency did not recover.
For the US Secretary of the Treasury, Janet Yellen, who spoke on Tuesday before the Senate Banking Committee, this episode “simply illustrates the fact that it is a product with rapid growth, that it presents risks for financial stability and that we need an adequate framework”.
Stricter regulation of “stablecoins” (stable cryptocurrencies) would be a good thing in the long term, believes Anto Paroian, chief operating officer of “hedge fund” (speculative fund) ARK36, which specializes in cryptocurrencies.
“But if stablecoin issuers are tightly regulated like banks, it could suffocate one of the most innovative, successful and important sectors of the cryptocurrency market,” he said. .
Cryptocurrencies as a whole have been suffering for several weeks from investors’ aversion to risky assets with the uncertainty created by the war in Ukraine and the continuation of inflation.
Bitcoin briefly dipped below $30,000 on Tuesday, its lowest since July.