New York: Crypto-currency markets are being rocked after a popular token lost 99 percent of its value, dragging down a so-called “stablecoin” with it. The Terra Luna token fell from a high of $118, last month, to $0.09 on Thursday.
The collapse had a knock-on effect on a linked token, TerraUSD, which is normally stable. And, spooked investors are now pulling out of major crypto-currencies, sending markets plummeting. But on Thursday TerraUSD fell to $0.4 according to the trading website Coin Market Cap. Tether, the most popular stablecoin, also fell off its US dollar peg – to an all-time low of $0.95.
The combined market value of all cryptocurrencies is now reportedly $1.12trillion, about a third of its November value, with more than 35 percent of that loss coming this week. The term “crypto crash” has been trending on Twitter and Google Search.
One Bitcoin is now worth below $27,000, its lowest value since December 2020 and down from a high of nearly $70,000 late last year. Ethereum, the second-largest coin by value, has lost 20 percent of its value in 24 hours.
“The collapse of TerraUSD has started what we used to call ‘the panics’, when major financial institutions sold off large chunks of assets and everyone else tried to take their money out as quickly as they could,” economist Frances Coppola said.
Lawmakers and officials in a number of countries have called for stablecoins to be regulated. US Treasury Secretary Janet Yellen cited the TerraUSD collapse, in a Senate committee meeting on Tuesday, to ask again for robust regulation. “It simply illustrates that this is a rapidly growing product and that there are risks to financial stability and we need a framework that’s appropriate,” she said.