Of the many cryptocurrencies on the market, TerraUSD was one and considered a blue chip among stablecoins. The unexpected has now happened with its crash. Investors are struggling to come to terms with huge losses in terms of retirement funds and savings. Terra’s market value just before its collapse was $18 billion before collapsing mid-May.
Its sudden and unexpected downfall is serving as a reminder that cryptocurrencies are part of a weakly regulated market. There aren’t many recovery or recourse options for investors either. Investors were not expecting an event of such magnitude considering the currency was designed to keep its intrinsic value – $1 for every coin. Unlike Bitcoin, Terra was considered very safe for investors. On Friday, May 27th, 2022, Terra was trading at 3 cents.
Investors bought a lot of TerraUSD because it offered the opportunity to make money on its Anchor Protocol. Yields were expected to be around 20% on deposits. Such rates are common in the DeFi sector. Apparently, the pitch turned out to be too good to be true and the currency’s value imploded.
DeFi insurer InsurAce has offered to honor claims but has lowered the value of its payouts.
The company says that it has processed almost all of the claims and will pay out $11 million. According to CMO Dan Thomson, the company’s decision to narrow down the window for filing claims was done by them to reduce further losses. Such modifications are permitted under the company’s service terms. This move has raised a lot of chatter in the crypto world and is seen as a way to get out of consumer agreements. The shocking collapse of Terra has gotten the attention of financial regulators from around the world.