The recent collapse of the stablecoin TerraUSD (UST) caught the crypto market by surprise. For people who saw Terra as a safer asset compared to other openly more volatile cryptocurrencies, and invested heavily in the coin or its associated Anchor protocol, they are now dealing with the fallout as they release assets to try to compensate. their lost nest eggs. A report from The Wall Street Journal on Friday told the stories of several of these investors, including a doctor who explained how the fall of TerraUSD is affecting his family’s future.
Keith Baldwin, a 44-year-old surgeon who lives outside New Bedford, Massachusetts, has saved $177,000 over the past decade. Last year he took his savings and bought USD Coin, putting it into a crypto account that paid an annual return of 9%. In April, he moved it to a TerraUSD-powered pseudo-savings account that offered 15%. Over 90% of his savings vanished in a few days when TerraUSD lost its peg to the dollar. Dr. Baldwin said that he was unaware that Stablegains, the startup managing the account, was converting his USD Coin holdings to TerraUSD. (USD Coin has maintained its parity of $1). When Dr. Baldwin learned that TerraUSD’s problems were threatening his savings, he was quick to withdraw his funds from Stablegains. Hours passed while the site processed the transfer. When they landed on Dr. Baldwin’s newly created account on the Kraken crypto exchange, the coin was trading for just 14 cents. Dr. Baldwin does not consider himself a cryptocurrency enthusiast. He was hoping to spend the money on a house. Now he has been cutting expenses so he can save for his children’s education. “I don’t want to punish our children for the mistake I made,” he said.
A Rest of the World report investigated the devastating effects of TerraUSD’s decline for people outside of the United States, in Argentina, Venezuela, Iran, Iraq, and Nigeria, who looked to the stablecoin as a way to store their funds that they could afford. to inflation. better than its often volatile local currency. Many of them reported learning about crypto from YouTube and said they believed in its safety because it was traded on popular exchanges like Binance. A woman from Buenos Aires said she invested after spending months researching Terra, only to lose all of her savings (about $1,000) in the accident. The article quotes a man from Pakistan as saying, “I have nothing left, not even a penny.” We have explained the arbitrage between Terra and its sister token Luna which was supposed to keep the value of UST fixed at $1, and the troublesome Anchor saving protocol attached to it. As the value of UST changed above or below that mark, holders could burn one of the sibling tokens to balance 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 percent because you would lend your money to someone else for collateral and pay back the yield on your collateral as well as the interest on the loan. Both deposits and interest were in UST. However, investing in Anchor meant that it took even longer to get the money out of it as the value of UST and Luna fell after an unusually large transaction triggered a death spiral. According to Bloomberg, both Terra and Luna are close to a relaunch (which will change the names of the original coin to Terra Classic and Luna Classic) in a bid to change their company’s blockchain name and become attractive to investors and traders alike, just a few weeks later. its collapse. Vice reports that the crypto industry is showing clear signs of instability, but native crypto venture capitalists with nowhere else to go continue to pour billions into drastic moves. You can read articles from The Wall Street Journal here and Rest of the World here.
