Crashes like the Terra Luna collapse make headlines, but don't doom the crypto space just yet

The spectacular meltdown surrounding the Terra stablecoin and Luna governance token might be generating headlines, but it’s no indication that the broader crypto asset marketplace is headed for a collapse.

Stablecoins have quickly moved from a niche area of the crypto sector to a type of crypto asset that has been heralded by many as the best of both worlds.

By combining the functionality and price stability associated with fiat currencies with the speed, security, and lower fee structure of cryptocurrency stablecoins have – rightly so – experienced a dramatic increase in both interest and adoption.

Terra Luna stablecoin collapse explained: Is this the 2008 financial crash moment of cryptocurrency?

TerraLabs, the parent organisation of the Terra stablecoin, seemed like just the latest entrant to this space, and appeared to have come up with an innovative solution to entice additional investment to the project: an algorithmic stablecoin.

Without diving into too much technical detail, the algorithm underpinning the Terra stablecoin was developed to address the fundamental problem with any stablecoin; how is the stabilisation maintained?











 

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