Terra is a decentralized financial payment network that rebuilds the traditional payment stack on the blockchain. Luna is the reserve currency of the Terra platform. It has three core functions: i) mine Terra transactions through staking, ii) ensure the price stability of Terra stablecoins and iii) provide incentives for the platform’s blockchain validators.
Terra’s plunge is not the only factor that could be causing volatility a statistical measure of dispersion of returns, measured by using the standard deviation or variance between returns from that same security or market index. in the Bitcoin market, as there are other elements to consider. Goldman and BoFA provided encouraging analysis.
The second largest bank in the United States,Bank of America (BoFA), has issued some hopeful analysis on the widespread bearish scenario currently seen in the cryptocurrency cryptocurrencies are digital currencies that use cryptographic technologies to secure their operation. market.
In a recent report, the bank’s analysts highlighted that investors’ excessive concerns about the possibility that the digital asset market an area or arena, online or offline, in which commercial dealings are conducted. faces a risk of “ infection ” of Earth after its dramatic collapse last week, are unfounded. While they argued that the fall of the stablecoin a cryptocurrency with extremely low volatility, sometimes used as a means of portfolio diversification. Examples include gold-backed cryptocurrency or fiat-pegged cryptocurrency. UST, from Earth and its native cryptocurrency LUNA, possibly contributed to the volatility in Bitcoin the biggest and most popular cryptocurrency in the world. It is a decentralized digital currency that enables users to make trustless peer-to-peer transactions. and the rest of the cryptocurrency market, believe there are other factors to consider.
In a May 17 memo that was quoted by CoinDesk bank analysts said investors need to be aware that cryptocurrencies are a “ emerging technology asset class and tokens driving ecosystem trading as high-growth speculative risk assets “.
The digital digital technologies are these electronic tools that have the ability to generate, store or even process data. assets face similar headwinds to traditional assets, including rising inflation, higher interest rates and increased risk of recession. BoFA analysts added.
BoFA gives an encouraging analysis
The unpegging of UST also doesn’t necessarily lead to conclude the broader stable-currency market crash, the bank said. UST is not backed by traditional assets and the loss of its peg a “peg” is a specified price for the rate of exchange between two assets. shows the durability of the broader stable-currency market, because the larger stable currencies held their own, it wrote. CoinDesk , citing the footnote.
The report also addressed some possible reasons that led to the recent unexpected implosion of Earth . The fall was due to the fact that Earth prioritized UST adoption over its price stability, analysts explained.
According to the coverage of CoinDesk BoFA was not optimistic about the reactivation plans of Earth still believes in the potential of a stablecoin successful algorithmic . As reviewed by DiarioBitcoin This week, a governance in the world of cryptocurrencies, governance is defined as the people or organizations that have decision-making powers regarding the project. vote to fork the blockchain a distributed ledger system. A sequence of blocks, or units of digital information, stored consecutively in a public database. The basis for cryptocurrencies. was set in motion. Earth and thus create a new and better version of the network.
The banking giant also anticipates that the event will accelerate regulations around the stablecoins He does not believe this would lead to a total ban, though. Banning algorithmic stable currencies would be “ premature ” and could slow the ecosystem’s growth, analysts said, according to the coverage.
Goldman Sachs is also optimistic
The legendary bank of Wall Street , Goldman Sachs shared some insights. In a Thursday report, reviewed by CoinDesk , Goldman argued that it was unlikely that the collapse of the Earth could impact the U.S. economy. BoFA analysts had already said in its note that it did not consider that the event could indirectly affect traditional financial markets.
Both financial titans also seemed to agree in their optimistic stance on the future of algorithmic stable coins. In a previous report, cited byThe Block a file containing information on transactions completed during a given time period. Blocks are the constituent parts of a blockchain.analysts at Goldman had argued that such assets need wider adoption in real-world payments to succeed.
While they believe that algorithmic stable coins may be at risk of speculative attacks, like other assets, they did not rule out a favorable horizon for this sector. “ Hypothetically, a stable algorithmic currency currency is a medium of exchange that defines value. could survive in the long a situation where you buy a cryptocurrency with the expectation of selling it at a higher price for profit later. run, if it had a continuous demand. transaction-related “said the experts from Goldman as quoted by The Block.
Bitcoin seeks to return to USD $30,000
The digital currency market has been particularly volatile this week, amid the collapse of LUNA and UST. Both cryptocurrencies have seen their prices plummet to zero, and their market capitalizations have also seen massive losses.
Some of the main ones stablecoins have also shown themselves to be unstable, includingTether (USDT), which last week momentarily lost its parity with the U.S. dollar and fell to 97 cents. USDT, the largest stablecoin by market capitalization, has seen it lose nearly $10 billion in market capitalization in recent days.
In the meantime, Bitcoin seems to face difficulties in maintaining its crucial level of USD $30,000. Last week, the flagship cryptocurrency retreated to USD $26,000, a floor it hasn’t seen since 2020. As of the time of writing, it is trading around USD $29,000 according to data from CryptoMarkets .
The picture in the rest of the market is not much different, with major cryptoassets posting significant losses. Ethereum a decentralized open-source blockchain with smart contracts functionality. the second largest cryptocurrency, remains slightly below USD $2,000.
Cryptocurrencies are not alone, as traditional markets are suffering as well. According to CNBC On Friday, the S&P 500 posted a nearly 20% drop from its January high. The data, which is in line with the BoFA report, suggests fears of an economic recession and points to broader macroeconomic factors, such as inflation a general increase in prices and fall in the purchasing value of money. and the continuing conflict between Russia and Ukraine.
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Article by Hannah Estefania Perez / DiarioBitcoin
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