After a week-long crypto crash, especially TerraUSD and Luna, that has wiped hundreds of billions of dollars, a senior official at the International Monetary Fund said on Monday that people shouldn’t completely shun the crypto world after the collapse of the popular Stablecoin.
Last week, the massive dip of the Stablecoin TerraUSD or UST and LUNA cryptocurrencies threw many investors into a massive loss. It affected the overall value of the global crypto market. Many investors claimed the entirety of their assets has been blown up with losing hundreds of billions of dollars.
The collapse of the TerraUSD stablecoin shouldn't prompt a pullout from all crypto, IMF Managing Director Kristalina Georgieva said https://t.co/2RCiVKY3V2
— Bloomberg (@business) May 23, 2022
The IMF Managing Director Kristalina Georgieva said at the World Economic Forum’s annual meeting in Davos late on Monday, “I would beg you not to pull out of the importance of this world.”
She added that “It offers us all faster service, much lower costs, and more inclusion, but only if we separate apples from oranges and bananas.”
Noting that it’s the responsibility of economic regulators across the globe to come to the aid of the investors by supporting and educating them; she said, “It is the responsibility of regulators across the globe to put up guardrails and offer education to protect investors.”
Speaking about the recent crash of the TerraUSD Stablecoins, Georgieva noted that there are many different types of assets associated with different levels of risk. For instance, she said, there’s a huge difference between Stablecoins backed by physical assets such as cash and other real-world assets to those backed by blockchain algorithms. The Terra coin is a Stablecoin backed by the blockchain algorithm to maintain a 1:1 value to a reserve asset such as the US dollar.
“The less there is backing it, the more you should be prepared to risk this thing blowing up in your face,” Georgieva said. However, she emphasized that not all digital assets should be considered the same as the crashed TeraaUSD.
The Crypto Meltdown
The sudden and massive blow to all crypto investors, users, and enthusiasts who invested a lot in the Stablecoin backed by the blockchain algorithm has always been imminent. Last week, the dip wiped out Bitcoin worth $3.5 billion– the crypto employed to defend and support TerraUSD (UST) Stablecoin; no one has any idea how a large sum of Bitcoin disappeared.
Earlier this year, a non-profit organization launched to promote the growth of the Terra ecosystem; LUNA foundation Guard bought 80,394 Bitcoin worth $3.5 billion.
With TerraUSD designed to always retain the value of a US dollar but fell to 17 cents last week, LUNA’s value also dropped so bad. Almost $15billion was wiped off the crypto market due to Terra’s crash.
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