While algorithmic stablecoins do have some risks, Binance CEO CZ thinks they have another shot.
Binance CEO hopeful for algorithmic stablecoins despite destruction
Terra UST lost its dollar peg in May. The UST price is supported by pressing LUNA as needed. This balance proved to be disturbed by heavy selling in bear markets. However, Binance CEO says algorithmic stablecoins still have a role in the market.
In a poscast today, Binance CEO CZ admitted he was “disappointed” with how Terra’s collapse was handled. He said the “operational response speed” was “very poor”. However, he added that fiat-backed stablecoins such as Tether and USDC also carry some risks.
According to CZ, not all algo stablecoins can be blamed for failing a project. However, CZ already thinks that algo stablecoins in general are riskier than fiat-backed stablecoins. Here’s what CZ had to say on the podcast for algorithmic stablecoins:
They have a different form of risk, but they are very transparent. There will always be volatility when you benchmark an asset, use an item as collateral, or peg one asset to another. Therefore, the risk of algo stablecoins is significantly greater.
Why did Terra fail?
Cryptocurrency investors relied on Do Kwon, the founder of Terra. Terra had a market cap of over $30 billion at one point. It was one of the biggest blockchains before it crashed in May. Terra specifically uses computer codes to maintain price stability. But this code finally failed. As a result, when the UST lost its stability, the LUNA price collapsed due to the endless tokens being minted for intervention.
Many regulators, such as the US Federal Reserve and the Bank of England, are currently discussing stablecoins. This is because they serve as the foundation of the cryptocurrency economy. In addition, they carry billions of dollars in transaction volume every day.
CZ predicted that the future viability of stablecoins will depend on education.
This information is very important for us to learn. Terra shed light on some of the shortcomings and dangers in this area. I believe we need to educate the general public as users, market participants and regulators. More user training required. People should be informed about the many stablecoin dangers in schools.
Will the LUNC fall further?
A descending triangle has developed on the 4-hour chart of LUNC/USDT. This is a bearish pattern that indicates the price will continue to decline. The breakpoint of this model is $0.0010399. If the price drops below this point, the bears’ next target will be $0.0009000, according to analyst Elena R.
Finally, CZ made statements about the US inflation data announced on May 13. As Kriptokoin.com, we have discussed the details in this article.
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