Published On: Sat, May 14th, 2022

Crypto news: Cryptocurrency could be facing ‘Lehman moment’ as markets crash | City & Business | Finance

The current crypto-crash has been mostly attributed to the fall of the ‘so-called’ algorithmic stablecoin UST, which was backed by a cryptocurrency called Luna. A stablecoin is supposed to be a stable safe haven for investors to park their profits amid the volatility of the market. UST was pegged to the dollar, however, at last check, it was worth $0.0004.

The collapse of the so-called “algorithmic stablecoin” called TerraUSD, also known as UST, has evoked comparisons to the 2008 Global Financial Crisis, as some analysts wonder whether the entire crypto ecosystem could be at risk of imploding.

The current UST stablecoin crash in the cryptocurrency world has been likened to the bankruptcy of Lehman Brothers on September 15, 2008, oft referred to as the “Lehman moment”.

The fall of the financial services firm was the climax of the subprime mortgage crisis.

When Lehman Brothers fell it was holding over $600 billion in assets and was the largest bankruptcy filing in US history.

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Ben Marlow, Chief City Commentator at the Daily Telegraph, wrote: “It’s doomsday for Bitcoin, Ethereum, XRP, Tether, Cardano, Polkadot and all those other cryptocurrencies with silly names and wildly inflated prices that defy all financial common sense.”

He added that “extreme volatility exists but the long-term trajectory of its most popular iteration – Bitcoin – is overwhelmingly upwards”.

Mr Marlow wrote: “From a price of zero when it was invented in 2009, it peaked at an all-time high of $68,789 last November.”

Mr Marlow considers the hike in interest rate as being a fundamental that could slow bitcoin’s upward trajectory.

He argues that the cryptocurrency could suffer along with traditional markets as a recession is now firmly on the cards.

He added: “As the Federal Reserve has begun to raise interest rates, money is exiting the financial markets at frightening speed.

“Risky assets such as tech stocks, high-yield bonds and now crypto are the first to see significant outflows.”

After the recent crash, the UK’s financial regulator, the Financial Conduct Authority, FCA, was quick to remind people: “If you buy crypto assets you should be prepared to lose all the money you invest.”

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