back to article Infusion of $3.5bn not enough to revive Terra's 'stablecoin'

TerraUSD, a so-called "stablecoin," has seen its value drop from $1 apiece a week ago to about $0.09 on Monday, demonstrating not all that much stability. The cryptocurrency token, abbreviated UST, is supposed to be pegged to the price of the US dollar. Hence the "stable" terminology. But UST is not a "centralized stablecoin …

  1. John D'oh!
    1. b0llchit Silver badge
      Go

      ...O

      ../\ O (tumble)

      ./..\ O (tumble)

      /....\ O (tumble)

      ^^^^^^ * (crash)

      (game of pyramids)

  2. BOFH in Training Bronze badge

    Do Kwon is better off, probably

    I understand Do Kwon had another algo stablecoin prior to Terra. Which also didnt' work.

    https://www.coindesk.com/tech/2022/05/11/usts-do-kwon-was-behind-earlier-failed-stablecoin-ex-terra-colleagues-say/

    And now he wants to restart again.

    https://www.bloomberg.com/news/articles/2022-05-16/do-kwon-proposes-creating-another-blockchain-from-terra-s-ashes

    Sounds like he isn't doing all that badly out of this crash. And will not be surprised if he gets another bunch of investors jumping in for his 3rd attempt.

    1. HildyJ Silver badge
      Facepalm

      Re: Do Kwon is better off, probably - Certainly

      Even in crypto, the execs always profit.

      And any "system" that allows literally anybody to create as many "coins" as they want is doomed to failure. There are over 10,000 "coins" looking for suckers.

      1. Blank Reg Silver badge

        Re: Do Kwon is better off, probably - Certainly

        there will probably be no shortage of suckers no matter how many coins fail

        "Two things are infinite, the universe and human stupidity, and I am not yet completely sure about the universe.” - Albert Einstein

        1. Anonymous Coward
          Anonymous Coward

          Re: Do Kwon is better off, probably - Certainly

          These pyramid/Ponzi schemes, implode when the new suckers buying in are out volumed by people selling out. It doesn't need an end to the suckers, it just needs them to be outnumbered by the insiders cashing out.

          Kwon's game there, looks to be no different than paying out prior investors a portion of the money you take in. It may be simply a way for him to confuse a jury, and portray himself as some sort of hero trying to save the currency using 'his' own money.

          You may also find that Kwon was cashing out at the same time as doing his "hero to the rescue" bit, and simply smoothing the cash out to try to extract more than he's putting in. Typically such actions will be done with trolls pushing "buy the dip" claims.

          There's the classic "the product is confusing and opaque and not the important things".... you're buying a stablecoin, but it's neither stable nor a coin. Claims of stability are bogus. Claims that arbitrage secures them are bogus. Claims that trading between two such worthless items somehow constitutes value, are bogus.

          If it was a stable coin with amazing returns, you might wonder why Kwon has cash.

          Crypto are just unregistered securities, designed to be confusing to the people they sucker in. No different than any other pyramid scheme or Ponzi scheme.

          1. Anonymous Coward
            Anonymous Coward

            Re: Do Kwon is better off, probably - Certainly

            "Crypto are just unregistered securities, designed to be confusing to the people they sucker in. No different than any other pyramid scheme or Ponzi scheme."

            Exactly. As you said, however, they have a huge added value: when the proverbial brown stuff hit the fan, they offer a whole world of excuses to dodge liabilities. Madoff didn't have this luxury ...

            1. MachDiamond Silver badge

              Re: Do Kwon is better off, probably - Certainly

              "Exactly. As you said, however, they have a huge added value: "

              I define value as the taking of a raw material and shaping it into a useful item. Most of the rest is making money. Often by manipulating money.

        2. MachDiamond Silver badge

          Re: Do Kwon is better off, probably - Certainly

          ""Two things are infinite, the universe and human stupidity, and I am not yet completely sure about the universe.” - Albert Einstein"

          Don't forget greed. That's in unlimited supply too.

  3. CommonBloke

    The only downside

    To this dumpster fire is that it only temporarily plummeted the other coins' prices. Would've been really interesting if the other "stable" coins also had to face their actual real value.

    1. DS999 Silver badge

      Re: The only downside

      They will, they are "stable" via different methods but other than the ones that claim to have actual dollar holdings for every dollar of claimed value (and we'll see which ones are lying and which aren't) they are all vulnerable.

      I've seen more than a few allegations that Tether does not hold anything remotely close to the amount claimed, and that a run on somewhere between 1/4 and 1/3 of it would cause it to collapse, and that would be a much bigger event taking bitcoin well below $10K. Perhaps nearly to zero if it drives enough longtime holders to sell before the house of cards collapses.

      Too bad there is a bag of popcorn icon, because that's what I'm grabbing when Tether starts going down.

      1. Brewster's Angle Grinder Silver badge

        Re: The only downside

        I'm not a crypto advocate, but would any bank survive a run of 25% of their deposits? You're just hoping a government steps in with it's fiat currency.

        1. Anonymous Coward
          Anonymous Coward

          Re: The only downside

          If the bank is promising to hold 100% of its deposits in reserve, and not operate any fractional-reserve loaning, then yes, I would expect the bank to survive a run of 100% of it's deposits. Otherwise it's fraud.

        2. Arthur the cat Silver badge

          Re: The only downside

          I'm not a crypto advocate, but would any bank survive a run of 25% of their deposits?

          That's exactly what central banks in countries with their own currency are supposed to do - act as the final provider of liquidity. It helps if you realise that retail banks aren't really about money, they're liquidity transformers, turning the potentially short term liquidity of deposits into the long term liquidity of loans and mortgages. Unless they've royally screwed their lending policies(*) a bank run is simply a liquidity squeeze, which is where the central bank steps in.

          (*) See: sub-prime mortgages.

        3. DS999 Silver badge
          FAIL

          Re: The only downside

          Why would I want a government to step in, the people buying crypto knew it wasn't backed by any government. That was the whole point for many of them!

          1. EVP
            FAIL

            Re: The only downside

            "But, but, but... somebody's got to do something!"

            Burn baby, burn.

          2. ecofeco Silver badge

            Re: The only downside

            Exactly. They eschewed, to the point of very loud proclamation, they did not ever want government interference.

            Now then can sleep in that bed of consequences. Play stupid games, win stupid prizes and cry me a river.

          3. Dave314159ggggdffsdds Silver badge

            Re: The only downside

            " the people buying crypto knew it wasn't backed by any government"

            Knew? Hoped, imagined, believed. But not 'knew', because whilst it's not entirely clear the evidence is against it.

        4. doublelayer Silver badge

          Re: The only downside

          In some ways, yes, the bank would survive this. They would do it by making some panicky calls to the central bank, but that's why they have set up relationships with the central bank. If it ends there, a run like that doesn't kill a bank because they become more conservative to keep control of the 75% they've still got in loans and other investments. A while ago, they wouldn't withstand that, which is why banks are usually required to do at least some of this and often voluntarily do even more than that.

          Why Tether should withstand it is different; they should withstand it because their product claims to be designed so that they have to withstand it. If I tell you that I'll store all your money and it's available to you whenever you ask, without waiting for me to move things around, then I have to do that. If I'm lying about doing it, then that's a problem. Doing that gives me nothing, which is why banks don't give you that guarantee. Tether said they'd set it up that way.

      2. rjsmall

        Re: The only downside

        I think it was Warren Buffett who said that only when the tide goes out do you see who has been swimming naked. It is easy to cover things up when the market is buoyant and going up.

      3. Doctor Syntax Silver badge

        Re: The only downside

        "other than the ones that claim to have actual dollar holdings for every dollar of claimed value"

        I wonder to what extent the same dollars might be propping up multiple "stable" coins.

  4. Anonymous Coward
    Anonymous Coward

    "Stable" Coins

    All of this has happened before.

    There's a semi-famous quote about the often tried, invariably failed Gold Standard and its other fixed-price cousins: "We don't use the Gold Standard. It’s not because we don't know about the gold standard, it's because we do."

    This quote may be entirely apocryphal, but it is entirely appropriate. A currency pegged to a fixed value is an invitation for speculators to attempt to break the bank that backs that currency and underwrites the value.

    Eventually the speculators will win.

    1. A Non e-mouse Silver badge

      Re: "Stable" Coins

      A currency pegged to a fixed value is an invitation for speculators to attempt to break the bank that backs that currency and underwrites the value.

      Eventually the speculators will win.

      John Major and Norman Lamont have first hand experience of this on an infamous day of the week.

  5. ghp

    That's the trouble with English. Apart from stablecoins, there are also stabledoors, which don't need closing once the horse has bolted. If a door was stable, it would be hard to open in the first place.

    1. Arthur the cat Silver badge

      I know of a horse that regularly gets stuck with its front legs on one side of its stable door and its back legs the other. Does that count as semi-stable?

      1. EVP

        Arthur's horse? Not in, not out, but somewhere in between. If you watch it, it's bound collapse into a state.

        1. Arthur the cat Silver badge

          It can't collapse(*), it's got the stable door wedged under its stomach. It just stands there with a stupid expression on its face(**) waiting for the humans to do something.

          (*) Obviously not a quantum horse.

          (**) Really. Stupid even for a horse.

          1. EVP

            But isn’t it in a half-stable and stable state at the same time? Quantum physics is weird enough, but this not-a-quantum-horse buggers the mind.

            On a side note, consider how fried vegetables exhibit quantum properties: healthy and yet unhealthy.

      2. Anonymous Coward
        Anonymous Coward

        "I know of a horse that regularly gets stuck [...]"

        That seems like a metastable condition - where the time taken to be fully in one or the other position is unpredictable.

        In logic circuits it can happen when a changing input signal level breaks the set-up timing constraints of the next element. Often a problem with asynchronous inputs to clocked flip-flops.

  6. simonlb
    WTF?

    And People Still Fall For This?

    "...a savings protocol that at one point paid participants close to 20 percent interest on their investment."

    Everything about that statement screams ponzi scheme to be avoided at all costs. There is absolutely nothing whatsoever stable or trustworthy about any cryptocurrency.

    1. DS999 Silver badge

      Re: And People Still Fall For This?

      What's old is new again. People believe it because they'll produce a graph of bitcoin value from inception to today, with a dashed line showing it going to a million bucks in a couple years. Suckers will think they can easily support paying out 20% interest from that but spare them from the volatility of actually holding bitcoin.

      When I was a kid my dad gave me this nice diver's watch good to 660 feet. He got it when it put $10,000 in a bank in the Bahamas that paid a 10% interest rate (which was only a few percent higher than US banks were paying back then) but it went under and he lost that money. Fortunately he could easily afford to lose that, but he liked to tell me I was wearing a "$10,000 watch".

      I used to wear that all the time, even in the shower or when swimming, because it was a diver's watch so obviously waterproof. Until one day when I saw water inside the crystal - turns out it was regular steel plated with a thin layer of silver, and a few years of wearing it caused my wrist to wear through that plating on the back. I didn't notice it starting to rust in the seam. Kind of fitting considering where it came from.

      Only watch I ever wore, so at least I got that out of my system then instead of wasting money on a Rolex later in life lol!

      1. Tom 7 Silver badge

        Re: And People Still Fall For This?

        A yankee friend of my dads got a Rolex and it was pointed out to him that he was still wearing it while helping us wash up after another drunken dinner and he said 'Its waterproof to 660 feet' and my mum pointed out it was half full of washing up water. He indignantly returned it to the shop who refused to accept it leaked and said be must have left the button out. It took him an hour of argument for them to get a glass of water into which the watch was lowered and rapidly filled. About a year later it turned up in the shop again with 'no fault found' and he wisely demanded another glass of water for the faultless watch to bubble and fill.

        Never have too much confidence in your product or you're whole company can look arseholey.

        1. gnasher729 Silver badge

          Re: And People Still Fall For This?

          Mate of mine is a builder. He always breaks watches. On a trade show someone claimed to sell an "unbreakable" watch. He took it, smashed it on the table, and it broke. He said "can I try another one?". They didn't give him a third watch to try.

          1. Anonymous Coward
            Anonymous Coward

            Re: And People Still Fall For This?

            The Radio Club had a lecture by a man from a capacitor company - who brought along a few samples. He was asked about the durability of the value/rating markings . He was confident they would stand any wear and tear. A club member promptly used a finger and thumb to erase the markings. As a clock repairer he had the regular practice of winding mainsprings onto their drums.

        2. Anonymous Coward
          Anonymous Coward

          Re: And People Still Fall For This?

          I have an Omega Cosmic Seamaster. It is now reserved for rare "dress" occasions. The insides had rusted away twice in 30 years just from hand washing and sweat.

      2. Paul Crawford Silver badge

        Re: And People Still Fall For This?

        A friend of mine goes diving and he has little time for the claims of waterproof watches, most are only short term static pressure proof at best.

        So '50m' really means it is OK to shower with it on. Though quite why you would not normally take it off is a mystery to me, I would rather be clean underneath!

        1. Pascal Monett Silver badge

          Agreed. A "waterproof" watch is just a watch that can withstand being in the rain or under a fawcet for a short moment. You dry it off and it'll continue ticking.

          Divers do not use of-the-shelf watches. They use professional gear that can actually withstand the pressure of 5+ bars under water.

          1. Yet Another Anonymous coward Silver badge

            Japanese semiconductor plants demonstrated their faith in their environmental standards by putting $$$$ worth of Koi in ponds fed by the cleaned waste water.

            A UK lab followed the same policy, only to have the whole lot killed the first time the local farmer muck spread and all the rain water runoff went into the ponds.

    2. DrXym Silver badge

      Re: And People Still Fall For This?

      Welcome to the world of digital currency. It's all ponzis & pyramid schemes. Suckers have to buy in for others to exit with profit. Then it collapses and resets. The people profiting are those who can afford to buy in at the reset and kick off the BS & hype again, or the likes of Elon Musk who can shift the market with a tweet one way or the other.

      And NFTs are a whole new level of scams. The "rug pull" is the classic one - selling bullshit NFTs and then disappearing with all the money.

      1. gnasher729 Silver badge

        Re: And People Still Fall For This?

        I thought once you sold an NFT the money was yours and it was totally legal to disappear?

        1. doublelayer Silver badge

          Re: And People Still Fall For This?

          Yes, unless you do it very wrong, it's a more legal way to scam someone (you haven't lied about what they're going to get). If you advertise it as an investment too much, however, you could still find someone willing to test whether they can get a court to agree that you've stepped over the line. It wouldn't be the first thing advertised as an investment that had no value and no reason to expect people to keep wanting it.

          1. Anonymous Coward
            Anonymous Coward

            Re: And People Still Fall For This?

            Much of the collectors' market in art and potential antiques is like that.

  7. Michael H.F. Wilkinson

    Somehow ...

    I do not regret not getting involved in stablecoin or any of its ilk. A 20% interest rate is a huge red flag, in my view. A simple rule I follow in these cases is "If it sounds too good to be true, it probably is".

  8. Binraider Silver badge

    ‘DISAPPEARED’?

    Who walked off with the proceeds I wonder. Pyramid schemes have some winners if you time it correctly.

    1. BOFH in Training Bronze badge

      There were some large amounts of this "stable coin" being shorted, as I understand.

      I assume they/he/she made a bundle off this crash.

      1. Doctor Syntax Silver badge

        A bundle of what? The article mentions getting an investment but the investment in turn is in BitCoin. Where's the real money in all this, other than that paid in ransoms and, presumably, being taken out surreptitiously somewhere or other.

        1. doublelayer Silver badge

          If they took out their money in Bitcoin, that still has value. They can exchange it for normal currency or keep it in Bitcoin without having to be in this particularly unstable thing, and if they were shorting it a while ago, they almost certainly did that. Bitcoin didn't have the same collapse as this did.

  9. DrXym Silver badge

    So to summarise...

    ... this "stable" coin existed to exactly track the US dollar, and people actually bought this digital scrip instead of actual dollars, because *mumble* reasons? In hindsight that didn't seem like the smartest of ideas. Or in foresight.

    1. Anonymous Coward
      Anonymous Coward

      Re: So to summarise...

      maybe they should have bought Linden Dollars instead...

      1. ecofeco Silver badge

        Re: So to summarise...

        Or Flooze and Beanz!

  10. Potemkine! Silver badge

    House of cards

    These are pure financial games, based on nothing real. No value produced, just speculation.

    I don't feel bad for the people who lost their "investment" there: they tried to make money from other fools making the same bet.

  11. Howard Sway Silver badge

    Look at the language used

    gold standard for passive income

    stablecoin

    smart contract

    All has the soothing ring of security and cleverness used by every conman since the dawn of time to lure their victims into believing it's wise and safe to part with their cash. The only way to really invest and make money is to put it into something that is ultimately driven by productive work, that does real life things for people. Because it's that work that adds the real value. Speculation on fictional coins and pictures of drooling cartoon monkeys can be safely said not to fall into this category, as nothing of use or desirability is ultimately produced.

  12. ecofeco Silver badge

    Eat the rich

    When the rich have 42 BILLION dollars to just burn, they have too much money.

    When they also burn billions more on other failed enterprises, they are a proven detriment to every society on earth.

  13. MachDiamond Silver badge

    If you have more money than brains

    I get it. I see the value in having some anonymity in a financial transaction from time to time. In my life, I don't have the need. The electric company is keeping records, the county has me down for the property I own. The state knows about my cars and the tax man knows who has paid me how much and when. I have a few investments that are on the conservative side and all pay a dividend. Aside from a rainy day stash, I try to spend money strategically. The house and cars are paid in full. I am saving to put a new roof on the house and at the same time make provisions for adding solar panels to reduce my electric bills. Other technologies are going in to further reduce my expenditures on utilities. I pay my auto insurance in full when it's do to avoid interest and fees.

    I don't see any value to me to make me want to fiddle with any sort of virtual currency. I have better, less risky places to invest for a gain or reduce liabilities. If I had the money sitting, I'd open a savings account and designate it as a reserve for auto liability and not have to pay for insurance anymore. That would be a chunk of change not flushed down the drain each year and there'd be a tiny bit of interest on it too (very little).

  14. Anonymous Coward
    Anonymous Coward

    "That would be a chunk of change not flushed down the drain each year and there'd be a tiny bit of interest on it too (very little)."

    Most savings accounts don't pay enough interest to balance inflation. Then the tax people want a cut of your interest too. It's just a wasting asset.

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