The co-founder of Tether said stablecoins like terraUSD, which have collapsed and sent shock waves through the crypto market, are unlikely to last.
A stablecoin is a type of cryptocurrency that is usually tied to a real asset like TerraUSD that was supposed to be pegged to the dollar.
While stablecoins such as Tether and USD Coin are backed by real assets such as fiat currencies and government bonds in order to maintain their peg to the dollar, TerraUSD was governed by an algorithm.
The currency lost its peg to the dollar, and this also led to a sell-off in the sister currency “Luna”, which lost all its value. The disaster has led to warnings that stablecoins may not have a future.
“It is unfortunate that the money was lost, however, that was not a surprise,” explained Reeve Collins, co-founder of digital token company BlockV. It is a stable currency backed by algorithms. So behind it is just a group of smart people trying to figure out how to associate something with the dollar.
“A lot of people withdrew their money in the past few months, because they realized it was not sustainable,” he added. So this kind of collision has had a cascade effect, and it will probably be the end of most stablecoins.” (agencies)
