Two linked cryptocurrencies collapsed and lots of people lost money. Coinbase said investors who use its platform might lose their crypto if the company ever went bankrupt. And the whole crypto complex had a week on the skids. Here’s what happened in crypto last week:
Luna cryptocurrency and terraUSD stablecoin collapse
A week ago, the luna cryptocurrency traded at $80 a coin. Now it’s worth less than a penny. The terraUSD stablecoin, which is designed to be worth a dollar at all times, is now worth about a quarter.
Luna and terraUSD are linked on the terra blockchain, and the idea was that the luna cryptocurrency would stabilize the terraUSD if the stablecoin’s value was ever in danger of wavering from the dollar mark.
The method didn’t work, and many people who owned luna and terraUSD lost most of their investment. A subreddit for the community quickly filled with ominous comments.
The collapse of terraUSD came up when Treasury Secretary Janet Yellen appeared before lawmakers on Thursday to speak on cryptocurrency risks. “They’re growing very rapidly,” Yellen said about stablecoins. “They present the same kind of risks that we have known for centuries in connection with bank runs.”
The US hasn’t enacted federal stablecoin regulation, but a number of federal agencies are looking into cryptocurrency rules, per an executive order issued by President Joe Biden in March.
Read CNET’s full story on the luna cryptocurrency crash here.
New Coinbase disclosure says users’ cryptocurrency held by the exchange could be at risk if Coinbase ever goes bankrupt
Coinbase, the large US crypto exchange, disclosed in its earnings on Tuesday that any coins that users store on its platform could be gone if the company goes bankrupt. Not reassuring for many folks.
The disclosure, made in the “Risk Factors” section of the quarterly report, says that “because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.”
That’s legalese for, Your coins could be used to pay off Coinbase’s other debt obligations if the company went under.
The reaction prompted CEO Brian Armstrong to tweet that the disclosure was made simply to comply with an SEC requirement. Coinbase, he says, isn’t at risk of bankruptcy.
Read CNET’s full story on Coinbase’s new risk disclosure here.
The cryptocurrency market dropped more than $200B in 24 hours
In a 24-hour window spanning Wednesday to Thursday, the total cryptocurrency market cap dropped more than $200 billion, according to data from price-tracking site CoinMarketCap.
Bitcoin and ether, the two largest cryptocurrencies by market cap, are both trading at least 15% lower than seven days ago. The one-day wipeout comes after weeks of sagging cryptocurrency prices. Bitcoin has lost more than half its value since its high point in November.
Read CNET’s full story on crypto markets plunging more than $200 billion in a day here.
Thanks for reading. We’ll be back with plenty more next week. In the meantime, check out this story by Bree Fowler examining the threat of ransomware on the one-year anniversary of the Colonial Pipeline cyberattack.
