Terra Luna Collapse, its Repercussions, and the Rise of Stablecoins

• In May 2022, Terra Luna collapsed.
• There were many reasons for its fall.
• TetherUSDT is the best stablecoin to date.

Terra Luna, one of the algorithmic stablecoins, had a massive fall in May 2022. Third largest Cryptocurrency after Bitcoin and Ethereum, its valuation took a hit of $50 Billion. It was an attack on the stablecoin, which was pegged to LUNA. It ultimately resulted in the downfall.

What happened was the burning and minting process was interfered with by attackers. The burning of that particular token’s assets resulted in Terra’s loss of value and de-pegging. However, Terra is back in the market with Terra Classic.

Fall of Terra Luna

Even though there was a fall in Terra, stablecoins are still the key between cryptocurrency and fiat. They are pegged to a stable asset, such as a dollar or another crypto token. The main purpose stable coins serve is when one wants to exchange tokens, as they are equivalent in price to the fiat currency they are pegged to.

There are multiple use cases of stablecoins, and they are considered one of the safest for beginners to trade in; they are considered very safe in terms of investments, and some stablecoins are stable in their true sense.

It should set an example for innovators for the future use of certain things; one of the reasons for its fall was it needed to be optimized with the industry standards at the time. It was bound to have a setback, but nobody predicted such a downfall.

Still, they can balance fiat and cryptocurrencies, resulting in smooth transactions. These tokens are essential as they could be called the link between traditional finance and crypto. 

Future of Stablecoins

Mainly, the pointers to take from the fall of the Terra are being updated with the technology, which is a must, and even the demands of customers. However, Terra has returned to the market with the Terra Luna classic. Classic’s main function is to absorb deviation for $UST. It can revive the terra ecosystem.

Their stablecoins are still in regulation and show the potential to grow, for example, the TetherUSDT, which has been carefully pegged at 1:1. It has problems regarding the rules and regulations of the government. It continues to dominate the stablecoin market.

Stablecoins will help in the adoption of cryptocurrencies all over the world once regulations are set concerning stablecoins. It is not only limited to that. When transitioning from traditional finance to cryptocurrencies, only stable coins are the link, ultimately resulting in terra luna being in the mainstream.  

Though the market is volatile due to the other tokens, Stablecoins can dominate the market and will do so until a complete adoption of blockchain in the mainstream. It has a bright and prosperous future ahead and will be able to leverage depending on the current market.  

Disclaimer

The views and opinions stated by the author, or any people named in this article, are for informational purposes only and do not establish financial, investment, or other advice. Investing in cryptocurrency and NFTs comes with a risk of financial loss.