The Coin That Could Wreck Crypto (Published 2022) (2024)

FAQs

What coin could wreck crypto? ›

As cryptocurrencies have plunged, attention has focused on a potential point of vulnerability: the market's reliance on a so-called stablecoin called Tether.

Collapse of Terra-Luna

In May 2022, the stablecoin TerraUSD fell to US$0.10. This was supposed to be pegged to the US dollar via a complex algorithmic relationship with its support coin Luna. The loss of the peg resulted in Luna falling to almost zero, down from its high of $119.51.

Bitcoin registered its worst month since the collapse of Sam Bankman-Fried's FTX empire as the euphoria around US exchange-traded funds (ETFs) for the largest digital asset subsides.

Gox was once the largest Bitcoin exchange in the world, handling over 70% of Bitcoin transactions. However, in 2014, it suffered a massive hack, losing approximately 850,000 Bitcoins. Mt. Gox filed for bankruptcy and left many investors empty-handed.

During that tumultuous period, #Bitcoin, the king of cryptocurrencies, crashed to a value below $4,000 as panic swept through the entire crypto ecosystem. Many investors and traders were caught off guard, unsure of what the future held for their investments.

When assets rise very quickly in price and surge to a record high, typically this makes a crash much more likely – or at least a correction, which is when the price falls back down to a more “normal” level. This appears to be the situation that bitcoin is in right now.

Our analysis suggests that it was not the result of targeted market manipulation by a single entity, but rather stemmed from growing concerns about the sustainability of the system. At the center of the collapse was Terra's algorithmic stablecoin, UST, and a blockchain-based borrowing and lending protocol, Anchor.

Has crypto crashed before? Yes, multiple times. For example, Bitcoin recorded a previous record high of nearly $20,000 in December 2017, but by December 2018 was trading below $3,500. It reached an all-time high of about $69,000 in November 2021 and in the year after, dropped by more than 75%.

Why did crypto crash so hard? ›

High inflation and tighter monetary policy affected crypto investors as well, resulting in the collapse of the market.

Dogecoin ($DOGE)

Spotlight Wire Dogecoin, commonly known by its moniker DOGE, being the world's first meme crypto is the strongest candidate on this list to achieve 1$ valuation. In the 2021 bull market, Dogecoin nearly reached this goal, hitting a high of $0.74376.

Luna, the cryptocurrency associated with TerraUSD, or UST, is now worth $0 as the stablecoin has dramatically lost its $1 peg. The Terra network stopped processing transactions twice in 24 hours. Binance, the world's largest crypto exchange, temporarily delisted UST and luna.

Losing more money than you make

It's not that no one has made money off crypto. In fact, our survey finds that of those who've had crypto, 28% sold it for more than it was worth. But a higher rate of investors — 38% — sold their crypto for less than it was worth when they bought it. Another 13% broke even.

Nolan Bauerle, research director at CoinDesk, says 90% of cryptocurrencies today will not survive a crash in the markets. Those that survive will dominate the game and boost returns for early investors.

Key Takeaways. Bitcoin, the cryptocurrency, is most likely to remain popular with speculators over the next decade. Bitcoin, the blockchain, will probably continue to be developed to address long-standing issues like scalability and security.