The algorithmic stablecoin UST de-pegging scandal caused the cryptocurrency Terra Luna to drop over 85% on Wednesday.
Gizmodo published an article on Monday that illustrated how much money you would have today if you had invested in various cryptocurrencies six months ago.
Except for Terra's Luna, all of the biggest cryptocurrencies, such as Bitcoin and Ether, were down significantly. You have around $119 worth of Luna early Monday morning if you bought $100 of Luna six months ago. But all of that has altered in only a few days.
Luna's price has dropped from $54.36 early Monday to $3.71 at the time of writing. Needless to say, a lot of money has been lost in a short amount of time.
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If you purchased $100 of Luna six months ago, it is now only worth $7.34. That's right, if you bought $100 of Luna just 24 hours ago, it's currently only worth $12.67.
But Luna isn't the only one who has had a hard time this week. Bitcoin has dropped 5% in the last 24 hours, Ethereum has dropped 4.3 percent, and BNB has dropped 7.7%.
Things become worse as you move down the list of prominent cryptocurrencies, with XRP (Ripple) down 5.8%, Solana down 12%, and Cardano down 11.6 percent. All of this happened in a single day.
What's the matter? Stablecoins, for example, appear to be crumbling. TerraUSD, Terra's stablecoin, fell to $0.69 late Tuesday before recovering marginally when the Terra Foundation sold a large amount of bitcoin.
Then it plummeted to a low of $0.31 early this morning, before rebounding to $0.44. Stablecoins are designed to maintain a peg to a certain currency, most typically the US dollar, however the stability is a fiction because the "reserves" for these stablecoins are nearly invariably non-US currencies.
During her appearance before the Senate Banking Committee on Tuesday, Treasury Secretary Janet Yellen also mentioned TerraUSD, a stablecoin produced in South Korea, as well as the volatility of stablecoins.
“I think that simply illustrates that this is a rapidly growing product and that there are risks to financial stability,” Yellen said.
After that, Yellen and Pennsylvania Republican Sen. Pat Toomey discussed moving forward with stablecoin regulations before the end of the year. However, it's unclear if laws would help stablecoins or just force many of them to go out of business and disappear.
When you look at the arithmetic, as credible news agencies like Bloomberg News have done in recent months, other stablecoins like Tether, the world's largest, are arguably just a house of cards ready to collapse.
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Under no circumstances do you "must hand it to Luna." In fact, if you want to make it out of 2022 with some money in your pocket, you shouldn't give it to bitcoin.
According to Yahoo Finance, at least 40% of bitcoin investors are presently in the red. And it doesn't appear to be getting any better anytime soon.
Bitcoin proponents began 2022 by touting the cryptocurrency as an inflation hedge. If you have kept US dollars over the last six months, your money has lost around 7% of its value due to inflation.
However, if you owned bitcoin, your "currency" has dropped by 52% and counting. At the very least, you may exchange your US dollars for necessities such as food and medicine.