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Stablecoins not so stable — Terra (UST) crashed

Terra, a stablecoin which is supposed to be pegged to USD, crashed this week (right along with the wider crypto market). This may mean trouble for crypto. The linked article is interesting — it goes into what happened and why it was inevitable.

  1. 2

    Interesting article for me who knows very little (and doesn't care much) about crypto. So forgive my maybe naive question. Why would I buy a stablecoin pegged to the dollar instead of simply buying .. dollars?

    I see that buying Bitcoins has a speculative element and you can hope that the price rises after you bought.

    But what's the point in buying a virtual dollar?

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      Let's say you live in Russia or Turkey, and you want to protect your stash of hard earned money. Maybe even try to move it abroad. First of all not in the local currency, because the value might decrease a lot. Second of all not in a speculative cryptocurrency, because you might need that money in a year, and it could have gone to 20% of the original value. Solution: a stable currency outside the reach of your local government: a stablecoin.

      If you live in US or EU, probably not that useful. But I guess all the smart contracts might want a stable currency to deal with.

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        Thanks a lot, that's a use case I understand.

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        This is exactly the use case of Bitcoin in many developing countries with weak depreciating local currencies.

        Because, as unbelievable as it may sound, Bitcoin is a lot more stable in value than their local currencies.

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      Mostly because it allows you to use Defi products such as Aave and Compound without being affected by the volatility of crypto. You can borrow stablecoins against your crypto, lend them out or use them as a store of value without having to deal with all the fees that come with moving money around in exchanges.

      They are one of the most important parts of DeFi.

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        Thanks, one day I should have a closer look, never even heard about Aave and Compound...

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          For me, it's by far the most exciting part of crypto. It's definitely a rabbit hole worth going into.

  2. 2

    I have absolutely no idea how Terra can continue after this...whats their plan going forward? When your a stablecoin that is suppose to be pegged to a dollar and your far below a dollar for longer then, I don't know, even 10 minutes, that's gotta tremendously hurt the project's reputation...

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      The founder already admitted that the project's goal of creating decentralized money has failed and that nobody is going to trust it again. Currently, they are just looking at restoring the Terra blockchain without UST. Mostly because the ecosystem has become quite big and there are many great developers.

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        Yeah, I don't know how it'll ever come back from this though.

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          It won't. But they really can't do anything else at this point but try to make the most of what's left.

  3. 2

    Looks like Don Twon has capitulated and no longer thinks UST can succeed. The guys also been crazy arrogant and cocky, I'm sure this is a wake up call for him. I'm guessing he's just trying to avoid jail at this point. I feel terrible for the people who lost a lot of money by investing with Do.

    1. 1

      Interesting. At least he seems to be taking responsibility for what happened after all that cockiness.

  4. 1

    Watched it all happen in real-time. Quite shocking but can't say I am that surprised. I pulled my money in February because many people were talking about an eventual death spiral. But what did surprise me, was that the rest of crypto just went along as if nothing happened. Expected a huge crash that didn't happen.

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      Crypto's been going down lately anyway, but yeah I don't think Terra's crash made it any worse.

      Nice work pulling your money in time.

  5. 1

    This is the best thing to happen to the crypto community in a while.

    This should be a lesson for everyone: there is no such thing as crypto, there is only bitcoin. Everything else, like Terra, is no different than fiat currency because it's centrally managed much like the Fed. Only Bitcoin is truly decentralized and valuable.

    1. 2

      Is that true - only Bitcoin? What about Ethereum and all the other usual suspects?

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        Ethereum is also quite decentralized. Most other cryptocurrencies currently are not that close.

    2. 1

      What is your definition of valuable?

  6. 1

    Man, crypto's going through the wringer. Not mad about it.

    1. 2

      yeah but what isn't going through the wringer right now

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