Analysts assess the aftermath of the Terra (LUNA) collapse | Cointelegraph interview

Financial commentator Frances Coppola is convinced that algorithmic stablecoins such as TerraUSD (UST) will always be vulnerable to sudden collapses, no matter how much the technology improves. 

“They can improve their game theory, they can improve their risk assessment, but I think there will still always be some states of the world that they won’t have thought of,” pointed out Coppola in a discussion with Mike McGlone, senior commodity strategist at Bloomberg.

Terra’s UST stablecoin, which relied on an algorithm to maintain a peg to the U.S. dollar, collapsed last week, sparking turmoil in the crypto markets.

According to McGlone, Terra’s collapse is part of a natural “purge” of the crypto space that happens in every bear market. According to the analyst, the concerns around leading stablecoin Tether (USDT), which briefly lost its peg to the dollar as a result of Terra’s collapse, shouldn’t be overestimated. 

As McGlone pointed out, Tether already depegged briefly in April 2019 when the New York state attorney general filed a lawsuit against its sister company, Bitfinex. 

“The market said, ‘We don’t care. This is a better way to transact dollars,'” said McGlone.

Coppola, on the other hand, pointed out that while investors were redeeming Tether en mass amid Terra’s collapse, other stablecoins such as USD Coin (USDC) and Binance USD (BUSD) performed as safe-haven assets, thus proving to be more trusted. 

Still, Coppola thinks Tether is unlikely to suffer a collapse similar to the one experienced by Terra, as it is backed by real assets held in its reserves. She pointed out that in the event of a crisis, Tether would be able to avoid a mass bank run by suspending redemptions according to its policy.

According to Coppola, the primary source of systemic risk for the crypto market is not stablecoins but crypto exchanges.

“In the event of a Coinbase failure, a lot of people are potentially going to lose a lot of money,” she said. “It would cause kind of a Lehman moment, if you like, in the crypto space.”

Check out the full discussion on our YouTube channel, and don’t forget subscribe!

All Dutch and English crypto news!

Telegram Mini Apps are ‘Trojan horse’ for mass blockchain adoption: TON Investments Director

Onboarding the next 500 million users will require simple apps with “actual usability,” TON’s Hyun told Cointelegraph. Interview Own this piece of crypto history Collect this article as...

Stablecoin delistings in Europe spell change for crypto exchanges, issuers

The largest stablecoin issuers are non-European, but they will have to get compliant fast if they don’t want to lose ground on the continent. Analysis Own this...

Jito (JTO) poised near key level; Is breakout to new all-time high next?

Jito (JTO) price bounced off lows of $2.79 and is eyeing new momentum above $3. A potential cup and handle pattern could see bulls target breakout...

Robert Kiyosaki “Alle pensioenen van boomers gaan kapot”

De gerenommeerde investeerder en auteur van het bestverkopende boek over personal finance, ‘Rich Dad Poor Dad’, heeft vandaag op 29 maart 2024 gewaarschuwd voor een...

Beste exchanges

Koop je crypto bij Bitvavo