Terra’s UST stablecoin crashed a few weeks ago, and some experts say the incident spells trouble for other algorithmic stablecoins.
The Terra blockchain collapsed a few weeks ago, and caused billions of dollars in losses in that short period of time.
The Terra Ecosystem stablecoin UST lost its peg against the US Dollar, resulting in the wiping of billions of dollars from the market.
Unlike stablecoins such as USDT and USDC, which are pegged to the US dollar, UST is an algorithmic stablecoin. This means that UST is governed by an algorithm.
Reeve Collins, co-founder of BLOCKv and co-founder of Tether, another stablecoin, told CNBC in a recent interview that he believes the collapse of UST will likely be the end of most algorithmic stablecoins.
During this he mentioned An interview with CNBC At the World Economic Forum in Davos. Collins said that;
“It is unfortunate that the money… was lost, however, it is no surprise. It is an algorithmically-backed, stablecoin. So it is just a bunch of smart people trying to figure this out. That’s how to put something in dollars. And in the last few months a lot of people pulled out their money because they realized it wasn’t sustainable. So that crash kind of had a cascade effect. And that would probably be the end of most algo stablecoins.”
Collins isn’t the only big name in the cryptocurrency space to discuss Terra’s collapse in recent weeks. Binance CEO, Changpeng Zhao spoke in depth about the collapse and the key role it played in the blockchain relaunch.
Jeremy Allaire, CEO of Circle, one of the USDC stablecoin issuance companies, also commented that;
“I have compared algorithmic stablecoins to the Fountain of Youth or the Holy Grail. Others refer to this as financial alchemy. And so there will be financial alchemists who work on magic potions to create and discover these things. are… the Holy Grail of a stable value, algorithmic digital currency. So I sincerely hope that the pursuit will continue.”
The collapse of UST has sparked talk about regulating the stablecoin ecosystem.
