The “algorithmic” stablecoin Terra plunged below $1 this week, raising alarms among regulators who are increasingly worried about cryptocurrencies.
Following wide cryptocurrencies plunges in recent days, Terra erased much of its value only this week after billions of dollars disappeared from its market value.
According to media reports more than $275 billion has been wiped off the value of the global crypto market in only 24 hours after the collapse of a Terra, that was supposed to be pegged to the U.S. dollar.
Also known as UST, Terra operated using a floating token called luna to balance supply and demand and stabilize prices.
Tether, the world’s biggest stablecoin, also slipped below $1 for several hours. Unlike UST tether claims to be backed by sufficient assets held in a reserve.
U.S. Treasury Secretary Janet Yellen has urged Congress to approve federal regulations on cryptocurrencies. She directly addressed the issue of both UST and tether “breaking the buck” this week.
Later, the Treasury Secretary questioned bitcoin’s legitimacy and stability.
“I don’t think that bitcoin … is widely used as a transaction mechanism,” Yellen told CNBC. “To the extent it is used I fear it’s often for illicit finance. It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.”