To firstly define, cryptocurrency is a digital or virtual currency secured by cryptography that makes it nearly impossible to counterfeit or double-spend. These are decentralized networks that are generally not issued by any central authority; hence are free from government interference or manipulation. The stock market which generally means the collection of exchanges and other venues is where the buying, selling, and issuance of shares of publicly held companies take place. Stablecoins, on the other hand, are cryptocurrencies the value of which is pegged, or tied, to that of another currency, commodity, or financial instrument.
However, at the peak of November 2021, Bitcoin’s value reportedly slumped below $30,000 for the first time causing a massive collapse in the entire cryptocurrency market. Situations became out of control, for instance, investors are withdrawing their money, causing Tether (USDT) to lose its peg to the dollar.
This unexpected crash caused great disbelief in investors as Bitcoin is often seen as a good hedge and/or will not be affected against inflation. But when the month of May 2022 came, the market, as well as crypto investors witnessed and experienced its greatest fall down due to the soaring high inflation rates and tighter monetary policy losing $600 billion in a week.
Meanwhile, stablecoins which are backed by fiat currencies like the US dollar, gold, and even other cryptocurrencies are supposed to maintain their value. However, Terra (LUNA) and TerraUSD (UST), two native tokens of the Terra network, were likewise and the most badly affected by the collapse of Bitcoin and are currently trading at under $1 per token, specifically $0.000000999967 for Terra (LUNA) and $0.13 for TerraUSD (UST) as reported by coingecko.com.
In sum, that week not only put an awareness that top altcoins like Terra can suffer overnight losses and struggle to survive, but at the same time has given investors and other crypto enthusiasts a wake-up call to invest carefully.
