On Monday, Gizmodo showed you how much money you have today if you invested in various cryptocurrencies six months ago. All the top cryptocurrencies, like Bitcoin and Ether, were down big, except for one standout coin: Terra’s Luna. If you bought $100 of Luna six months ago, you had about $119 worth of Luna early Monday morning. But that’s all changed in just a couple of short days.
Luna has plummeted from a price of $54.36 early on Monday to $3.71 at the time of this writing. Needless to say, people have lost a lot of money in a very short period of time. If you bought $100 of Luna six months ago, that crypto is currently worth just $7.34. Shit, if you bought $100 of Luna just 24 hours ago, that crypto is now worth just $12.67.
But it’s not just Luna that’s experienced an extreme crash this week. Over the past 24 hours, Bitcoin is down 5%, Ethereum is down 4.3%, and BNB is down 7.7%. Further down the list of popular coins, things get even worse, with XRP (Ripple) down 5.8%, Solana down 12%, and Cardano down 11.6%. Again, that’s all in just one day.
What’s going on? For one thing, stablecoins appear to be collapsing. Terra’s stablecoin, TerraUSD, crashed to $0.69 Tuesday evening before rebounding slightly after the Terra Foundation sold a ton of bitcoin. Then it crashed again to a low of $0.31 early this morning and currently sits at $0.44. Stablecoins are supposed to maintain a peg to a given currency, most commonly the U.S. dollar, but since the “reserves” for these stablecoins are almost always things that are not U.S. dollars, the stability is an illusion.
Treasury Secretary Janet Yellen even discussed TerraUSD, which was developed in South Korea, as well as the volatility of stablecoins during testimony in front of the Senate Banking Committee on Tuesday.
“I think that simply illustrates that this is a rapidly growing product and that there are risks to financial stability,” Yellen said.
Yellen and Republican Sen. Pat Toomey from Pennsylvania then discussed pushing forward regulations on stablecoins before the end of the year. But it’s still unclear whether regulations would improve stablecoins or simply cause many of them to go out of business and evaporate entirely. Other stablecoins like Tether, the largest in the world, are arguably just a house of cards waiting to collapse when you take a look at the math, as reputable news outlets like Bloomberg News have done in recent months.
You do not, under any circumstances, “gotta hand it to Luna.” In fact, you probably shouldn’t hand it to bitcoin either if you want to make it out of 2022 with some cash in your pocket. At least 40% of bitcoin investors are currently underwater, according to Yahoo Finance. And it’s not looking to get better anytime soon.
Bitcoin enthusiasts started 2022 by billing the crypto as a hedge against inflation. If you held U.S. dollars over the past six months your currency has lost about 7% of its worth to inflation. But if you held bitcoin, your “currency” has lost 52% and counting. And at least you can trade your U.S. dollars for things like food and medicine.