TerraUSD crash led to vanished savings and shattered dreams

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TeraUSD was seen as a blue-chip cryptocurrency. Now its investors are grappling with painful losses and are asking if it was all a get-rich-quick scheme.

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A surgeon in Massachusetts can’t stop thinking about how he lost his family’s nest egg. A young Ukrainian contemplating suicide after losing 90% of his savings. Other investors have given up on dreams of starting new businesses or quitting their day jobs.

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These all went into a frenzy for TeraUSD, whose total value reached $18 billion before falling earlier this month. The token’s sudden drop is a reminder that crypto – which enjoyed a huge bull market last year – is often little more than a casino, with weak regulation and few means of recourse for losers.

The crash shocked many investors as TeraUSD was a stablecoin, designed to maintain a value of $1 per coin. Unlike bitcoin, which has crashed repeatedly over its short history, TeraUSD was ostensibly touted as a port. It dropped below $1 earlier this month and was trading around 8 cents on Thursday.

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Investors piled into TeraUSD because of the money-making opportunity in the Anchor Protocol, a type of crypto bank that offered an annual yield of around 20% on coin deposits. Critics questioned whether Anchor’s yields were sustainable. But such eye-popping interest rates are common in decentralized finance, or DeFi, a parallel financial system with banks and their own version of lending for crypto.

An expanded version of this story appears on WSJ.com.

Credit: www.marketwatch.com /

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