Member-only story
We live in interesting times, specifically times that involve the cryptocurrency markets partially or completely unravelling. We are currently experiencing a crash of sorts, but it’s not apparent whether this is a crash or “the” crash — the latter being similar to the 2017 crash that brought Bitcoin from a high of around $19,000 to a low of under $4000.
In any case, here’s what’s happened:
- The “stablecoin” (a coin that theoretically is always worth, say, a dollar) Terra has completely fallen apart, due to the fact that its algorithmic balancing machine couldn’t quite work out how to create the supply and demand to keep the price at $1. It currently sits at around 70 cents, which is not great, because it’s the third largest stablecoin and, well, lots of people have been holding Terra’s UST stablecoin with the belief that they were holding onto a dollar. They were not.
- This has shocked the market, causing massive drops in the major cryptocurrencies, most notably Bitcoin, which has dropped from $39,000 on May 4 to $28,733 as of writing. Most cryptocurrencies generally follow the price of Bitcoin (due to the fact you regularly see trading pairs between a token and Bitcoin on major cryptocurrency exchanges), and thus prices are dropping across the board.
The real question isn’t whether this is bad, but how bad things are going to get. In the last few crashes, there has never been a particularly obvious event that precipitated the drop — sometimes there’re signs, but a selloff just suddenly…
