The recent collapse of the stablecoin TerraUSD (UST) took the crypto market by surprise. For people who viewed Terra as a safer asset compared to other more overtly volatile cryptocurrencies, and have invested heavily in the coin or its associated Anchor protocol, they are now facing the consequences as they abandon assets to try to compensate. their savings lost.
A report of The Wall Street Journal told the stories of several of those investors on Friday, including a doctor who explained how the fall of TerraUSD affects his family’s future.
Keith Baldwin, a 44-year-old surgeon who lives outside of New Bedford, Mass., has saved $177,000 over the past decade. Last year, he took his savings and bought USD Coin, putting it in a crypto account that was earning a 9% annual return.
In April, he transferred it to a pseudo savings account powered by TerraUSD which offered 15%. Over 90% of its savings disappeared within days when TerraUSD lost its peg to the dollar. Dr. Baldwin said he was unaware that Stablegains, the startup running the account, was converting his USD Coin holdings into TerraUSD. (USD Coin kept its peg at $1.)
When Dr. Baldwin learned that TerraUSD’s troubles were threatening his nest egg, he rushed to withdraw his funds from Stablegains. Hours passed while the site processed the transfer. By the time they landed on Dr. Baldwin’s newly created account at crypto exchange Kraken, the coin was trading at just 14 cents.
Dr. Baldwin does not consider himself a crypto enthusiast. He had hoped to spend the money on a house. Now he has reduced his expenses so that he can still save for his children’s education. “I don’t want to punish our children for the mistake I made,” he said.
A report of Rest of the world investigated the devastating effects of the decline of TerraUSD for people outside the United States, in Argentina, Venezuela, Iran, Iraq and Nigeria, who saw the stablecoin as a way to store their funds that could do better face inflation as their often volatile local currency. Many of them said they heard about the crypto on YouTube and said they believe in its security as it is traded on popular exchanges like Binance.
A Buenos Aires woman said she invested after spending months researching Terra, only to lose all of her life savings (about $1,000) in the accident. The article quotes a man from Pakistan saying, “I have nothing left, not even a penny.
We explained the trade-off between Terra and its sister token Luna that was supposed to keep the value of UST at $1, and Anchor’s troublesome savings protocol attached to it. As the value of the UST moved above or below this mark, holders could burn one of the sibling tokens to even things out (for every 1 UST created, $1 of Luna is destroyed, and the same in reverse) and make a small profit in the process.
Investing your UST in the Anchor protocol promised annual returns of nearly 20%, as it would lend your money to someone else in exchange for collateral, and pay you back the return on its collateral plus interest on the ready. Deposits and interest were in UST. However, investing in Anchor meant it took even longer to withdraw your money as the value of UST and Luna dropped after an unusually large transaction triggered a death spiral.
According BloombergTerra and Luna are both close to a relaunch (which will change the names of the original currency to Terra Classic and Luna Classic) in a bid to rebrand their company’s blockchain and become attractive to investors and traders, just weeks after its collapse.
Vice reports that the crypto industry is showing clear signs of instability, but native crypto venture capitalists with nowhere to go continue to invest billions in drastic measures.
You can read articles from The Wall Street Journal here and Rest of the world here.