Crypto crashed this week as 2 stablecoins broke the buck. Here’s what that means, and where the market goes next.

  • The cryptocurrency market lost $400 billion during the week as two stablecoins lost their pegs to the US dollar.
  • The losses threw algorithmic stablecoin TerraUSD and “traditional” stablecoin Tether into the spotlight.

The latest crypto sell-off emanating from the unexpected dollar-peg losses by TerraUSD and Tether tested the confidence of investors this week — and could amplify calls for Washington to work faster on regulation, experts told Insider.

While bitcoin showed signs of stabilizing above $30,000 on Friday, the crypto market saw more than $430 billion of the market’s valuation wiped out between Monday and mid-Thursday, bringing the cap to $1.12 trillion, according to CoinMarketCap data.

The price plunges of TerraUSD and its sister coin luna threw the spotlight on algorithmic stablecoins whose values are derived by a combination of computer codes and reserves to maintain a peg to a fiat currency. The market’s turbulence spread to Tether, sending the market’s third most valuable cryptocurrency briefly below its $1 peg before it regained parity.

“If there’s a complete loss of confidence with stablecoins then you can see that the market will really struggle to find footing here,” Ed Moya, senior market analyst at forex trading platform Oanda, told Insider. “Terra was flawed and that was seen by a lot of people. Tether is [recovering] its peg,” a move that should soothe some nerves, he said.

Bitcoin this week dropped below $27,000 for the first time since late 2020 as investors navigated the Terra-Luna collapse and Tether’s temporary slippage. Investors in the past have questioned what reserves Tether has to back up its peg.

“There were definitely some unique characteristics to this [crypto selloff],” including that took place in a broader financial market contending with decades-high inflation and a war between Russia and Ukraine, said Chris Kline, COO and co-founder of Bitcoin IRA.

“Then you add in this component of these experiments of…

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