The recent fall in the price of stablecoins — a type of cryptocurrency whose value is backed by another stable asset such as the USD, gold, commercial paper, etc. — has rattled investors in the already reeling cryptocurrency market.
Even though these coins are relatively small when compared to the market cap of some publicly traded companies, their growing popularity and rapid integration with the global financial system means that this sort of de-pegging event can potentially wreak havoc in the entire cryptocurrency space, which could eventually spill over to traditional financial markets.Article content
Now, the type of reserves depends on the type of stablecoin. In the case of tether, it is backed by cash or cash-equivalent reserves — commercial paper, fiduciary deposits, case, reverse repo notes and treasury bills, according to the company. On the other hand, terra is an algorithmic stablecoin whose value is propped up by another cryptocurrency.
The slump in terra’s price also spilled over to other stablecoins such as tether, which also briefly lost its peg with the dollar . Terra may have directly contributed to a selloff in bitcoin, but the bigger problem lies with tether, which is by far the largest stablecoin .Article content
'Volatility in bitcoin prices now explains 14% of the volatility in the S&P 500' 🤣😂🤣 wut! I had no idea an asset that peaked out at a little over $1 Trillion had so much power!
Tell that to ya boi Polievre.
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