Tether Co-Founder Thinks TerraUSD Crash Could Be The End For Algorithmic Stablecoins
The collapse of the algorithmic stablecoin TerraUSD has raised questions about the future existence of similar crypto assets, and Tether co-founder Reeve Collins believes the UST crash could mark the end of most algorithmic stablecoins, if not all. In an interview at the World Economic Forum in Davos, Reeves said that the collapse of TerraUSD “wasn’t a surprise” for him, adding that algorithmic stablecoins have not yet witnessed its worst. In his view, other algorithmic stable coins could soon follow UST, eventually bringing this to an end.
“Unfortunately the money…was lost, however, that’s not a surprise. It’s an algorithm-backed stablecoin. So it’s just a bunch of smart people trying to figure it out. trying to figure out how to fix something to the dollar,” Collins said speak to CNBC.
“… a lot of people have pulled out of their money in the last few months because they realize it’s not sustainable. So that kind of crash has had a cascade effect. And it will probably be the end of the story for most of us. all the stablecoins“he added.
A stablecoin is a cryptocurrency that is typically pegged to real-world assets. TerraUSD or UST, is an algorithmic stablecoin, which is believed to be pegged to the US dollar.
While stablecoins like Tether and Money USD Backed by real-world assets such as fiat currencies and government bonds to maintain their dollar rate, UST is governed by an algorithm.
Meanwhile, Jeremy Allaire, CEO of Circle, one of the companies behind the USDC stablecoin release, said he thinks people will continue to work on algorithmic stablecoins.
“I’ve compared algorithmic stablecoins to ‘Fountain of Youth’ or ‘Holy Grail’. Others call it financial alchemy. And so there will continue to be financial alchemists working on ghosts. to create these things and to find… the Holy Grail of a stable digital currency, so I fully look forward to continuing to pursue that,” Allaire told CNBC.