Terra’s Difficult Post-Collapse Path: VCs Retreating, Regulators Buying Stablecoins
The tragic fall of Terra has shaken the world of investors. Some are trying to salvage whatever they can while others regret even engaging with the cryptocurrency.
Amidst the chaos, BTC gains some momentum in the weekend trading. However, it may not be able to cross the $30,000 mark. Meanwhile, major cryptocurrencies like Ether have entered the green zone.
The aftermath of Terra’s collapse
Terra’s unfortunate demise has shocked investors and regulators alike. Many investors are trying to forget the incident and move away from the digital asset as far as possible. On the other hand, lawmakers and regulators are gearing up to lay down rules and regulations for stablecoins.
Around 80 per cent of Terra holders are pushing to restart the protocol. This would not include the algorithmic stablecoins.
After suffering immense losses, Terra’s investors are supporting this initiative. Among Terra’s investors are Galaxy Digital and DeFinance Capital.
Stablecoins need asset backing
The head of research at SEBA, Yves LongChamp, feels algorithmic stablecoins are unsafe. LongChamp confesses that even SEBA does not offer algorithmic stablecoins. These cryptocurrencies lack an underlying asset and are therefore unreliable.
According to LongChamp, regulations are extremely important for stablecoins. He believes that regulators must approve asset-backed stablecoins immediately. This will discourage people from investing in algorithmic stablecoins.
The problem with algorithmic stablecoins is that they create dollar at no cost. For example, in USDC you need to give a dollar in return for a dollar. Algorithmic stablecoins offer no such backing.