Another stable coin lost its dollar attachment after the controversial crash of UST from Terra.

Amid what appears to be a general volatility trend among stable coins, another US dollar-pegged asset showed instability on Monday.

DEI, an algorithmic stable coin native to the decentralized finance (DeFi) protocol DEUS Finance, lost its attachment to the dollar on Monday, falling to lows of 50 cents. The asset, which requires holding a stable price of $1, started crumbling down on Sunday and has been unstable.

The development arrives after the fall of Terra’s algorithmic stable coin UST, a digital asset project that crumbled down last week after its dollar-pegged asset lost parity. The events, which saw LUNA, Terra’s native token, fall from $80 to zero in just hours, have negatively harmed other market corners.

Bitcoin faced some difficulties recovering $30,000 as major digital currencies presented significant losses since the sad Terra incident. Meanwhile, other stable coins, including Tether (USDT) and Tron’s new USDD, have struggled to maintain their attachment to the dollar.

How Does the DEI Work?

Like UST, DEI is an algorithmic stable coin that operates by minting and burning DEUS, its sister item, to feed the parity with the dollar. However, unlike the Terra stablecoin, DEI is an asset with collateral features seen in other coins besides DEUS.

As Decrypt highlighted, users can always mint 1 DEI by depositing USD 1 in collateral. Collateral can be Circle’s USDC, FTM, MakerDAO’s DAI stable coin, WBTC (the wrapped version of Bitcoin), or DEUS and USDC. The collateral ratio between USDC and native DEUS tokens is 80%.

When DEI gets minted, the underlying collateral gets burned, while when the stable coin faces an exchange for collateral, DEUS tokens also get created. For example, if DEI got created employing USDC as collateral, the user would gain 80% USDC and 20% DEUS upon redemption.

If the DEI price goes by more than $1, users can mint 1 DEI employing $1 collateral and put it for sale to convert the difference into profit. Conversely, if DEI drops below $1, users can purchase a DEI for less than $1 on the open market and redeem them for $1 collateral in USDC and DEUS.

DEUS Token also Falls down

The DEUS token has also fallen in price along with the stable coin. According to data from CoinMarketCap, the project’s native currency is down just over 10% in the last 24 hours and is trading at $262 at press time. Before the fall, the price of DEUS had rebounded, touching the 321 dollars the unit.

The decline of its sister token could impact the DEI parity. In the meantime, to reduce the risks of collapse, the DEUS Finance team has stopped the swap process from helping stabilize the currency. They also announced that the money would be fully collateralized and assured that the parity would get restored within 24 hours.

Beyond the most recent situations that took effect in the market, the DEUS Finance ecosystem has experienced other difficulties that could now be impacting its stable coin. Its DeFi protocol went through two hacking attacks that drained more than $30 million worth of digital assets in the last two months.

By: Jenson Nuñez

A famous YouTuber registered a 3 million dollars loss; another user explained he had lost his grandmother’s inheritance, and many others declared themselves bankrupt after Terra hit the ground.

This week, the crash of the Terra ecosystem has been possibly the most impactful moment in the crypto environment.

The USD Terra (UST) algorithmic stable token, expected to keep a parallel cost to the US dollar, lost its parity and crashed to low rates registered at USD 0.3. The situation generated a negative impact on the cost of LUNA, Terra’s native digital asset, which slid more than 90% in the middle of the week. All in less than 72 hours while the rest of the crypto market experienced a massive bloodbath.

Amidst the situation, various users in the community shared their personal investment experiences, some more tragic than others. Others came to encourage the most disappointed, and the memes and jokes appeared everywhere.

UST had presented traces of volatility over the weekend, encouraging the entity supporting the project to take action and restore parity. However, the collision came later, on Wednesday, when the progressive instability of the stable coin hit its sister token, LUNA, with a blow. UST works through a LUNA mint-and-burn procedure to keep its attachment to the dollar, a structure labeled as solid but this week showed its weak points.

Terra’s cryptocurrency suddenly crashed and descended from 100 to 0 in a blink of an eye. According to data registered by Coinmarketcap, LUNA traded as high as $20 by Wednesday morning, and before ending the day, it crashed down to low rates reported at  $1.

The crash that LUNA experienced positioned the currency below the top of the list, as its market capitalization crumbled down from $30 billion to less than $500 million.

Another investor highlighted that he had lost at least $15,000 when LUNA crashed. The anonymous user expressed high hopes for the project and was saddened by the incident. I guess there is no house or savings then, he spoke, adding that he was at least grateful to have an understanding husband and two adorable children.

Several members exposed similar situations. In an entry that consulted publicly on the losses, more than a dozen investors expressed how they lost more than USD 10,000 after the recent crash. Among them, many said they registered millionaire damages after the crash.

Terra Community Mourns

Some celebrities lamented the crash. JJ Olatunji, also named KSI, a famous YouTuber based in the UK, explained to his more than 7 million followers on Twitter that he experienced how his multi-million investment in LUNA vanished in a matter of hours. He also acknowledged the loss in a post on his Crypto Twitter account.

The regrets of the community were not scarce. Various forum members highlighted that the losses had left them with significant struggles, ranging from bank debt to losing a home and even bankruptcy. In fact, among the most extreme cases, some users expressed a desire to die.

By: Jenson Nuñez

A third party is responsible for safeguarding the Bitcoin that an investor deposits in banks. As people are the custodians of the cryptocurrency, they do not need traditional financial institutions to use it.

Bitcoin (BTC) has permeated the financial system, where traditional banks have begun to offer it. Investors can acquire it as an investment asset or a cryptocurrency itself, but there are advantages and disadvantages.

First, a Bitcoin bank is not a banking entity dedicated to cryptocurrencies or an exchange that safeguards the BTC of its users. The term refers to those traditional financial institutions that have started offering cryptocurrencies to their customers.

Bitcoin is an unbanked asset as investors do not need a third party, making it an enemy of traditional banking. Now that the banking system offers cryptocurrencies, it is good to know what type of Bitcoin it sells.

Banks Make Bitcoin Lose Some of Its Properties

Satoshi Nakamoto described Bitcoin as a peer-to-peer (P2P) electronic cash system. He brought that solution to the world to enable the digital exchange of value without the need for a third party.

If people cannot withdraw their Bitcoin from a bank, they have no chance to be its custodians. They will not be free to exchange between peers as the institution will be in charge of storing and safeguarding their holdings.

As Bitcoin in custody is vulnerable, each user should own all the coins he stores. An outsourced custodian leaves the cryptocurrency prone to State seizure, hacking, and theft.

Bitcoin does not need regulation at the protocol level, so Chinese people can continue to use Bitcoin outside the law.

Banks Offer Some Legal Advantages to Certain Users

Although banks may break many of the properties of Bitcoin, they can offer a powerful legal tool for adoption. As regulations govern those financial institutions, they will offer the cryptocurrency depending on local legislation.

The Salvadoran Bitcoin Law established that all economic entities must accept BTC, from merchants to banks. Some banking entities offer the payment of credit card debts through BTC, while others have activated payment channels to use it.

The Development Bank of El Salvador serves as a bridge for those who have to receive Bitcoin but do not want it. The institution absorbs the risk, accepting the BTC exchange rate and paying the equivalent in fiat money.

Being the Custodian of Bitcoin Implies Responsibility For Its Safety

Self-custody provides privacy and free circulation without State control, but security and protection depend on each user. The person is responsible for keeping his BTC safe by choosing a wallet and giving the receipt to the recovery seed, among various means.

Some custody services delegate the security of the BTC to a trusted third party at the company level. Research agency Blockdata reported that those services grew by over 400%, with a reserve capital exceeding USD 4,500 million.

Despite being independent companies, custody services usually work closely with banks and financial institutions offering Bitcoin. That is due to outsourced BTC protection and extra backup guarantee on the deposits, as most of those services provide insurance policies.

Having Bitcoin in a bank causes it to lose some of its properties, but some people or entities may benefit. In addition, it will always be possible to operate with BTC on the Bitcoin network outside the banking system.

By Alexander Salazar

The correlation between bitcoin and the S&P500 reached an all-time high peak this week. Lateral or bearish behaviors in bitcoin would show a unique purchasing opportunity.

There is indecision about a new bear market that establishes new parameters for the bitcoin price or whether the recent visits to the $25,000 zone are just a simple correction.

Taking a look at the ongoing situation with the US market and its stock market ranks may be the best alternative to observe where the digital asset price is about to go in the short and medium-term.

The most prominent reason for this situation is the correlation that the price of bitcoin and the US stock indices share recently approached a new all-time high peak.

The main catalyst appears to be that many big-cap investors labeled a currency like bitcoin as just another risky currency. The crypto-anarchist goals with which Bitcoin got conceived, or the technological improvements around that digital currency, are for secondary features, so the possibility of raising speculations on its price drives them to consolidate purchase or sale decisions.

Thus, step by step, the price of Satoshi Nakamoto’s cryptocurrency walked in parallel with the world economy and adapted to the economic structures of many nations. Recent price behaviors, both for bitcoin, the S&P500, and the Nasdaq, prove this phenomenon.

The trend appeared to be doubtful until early 2020. Bitcoin was rising as a potent currency to consolidate counterinvestments and keep covered against the risk the fiat system tries to combat in the traditional markets.

But, since the decline due to the COVID-19 crisis, in March 2020, neither BTC nor other crypto assets remained safe. Since then, the correlation established to be a parallelism between BTC and the US economy has only increased.

According to the correlation with the Nasdaq, a US stock market that unites various technology entities, Mike Boroughs, founder of the Fortis Digital investment fund, said that five years ago, the people who were into digital assets were people into digital assets.

News to Beat Down Risky Investments

Considering the correlation between BTC and S&P500 shares, it will be helpful to acknowledge what projections could be useful for the US economic system in the short and medium-term to observe where the digital currency’s price could go and how it would behave.

The US 500 Stocks Index hit a 3-month low rate this week. The reason appears to be e the existing fear about the Federal Reserve’s procedures to fight against the crescent inflation.

On the other hand, some advantages could favor the average American but not financial speculators. When interest rates reach new peaks, investors tend to shy away from risky actions and stand their ground, waiting for a safer investment opportunity. Added to this situation is that the inorganic monetary issue in the United States of America could stop.

By: Jenson Nuñez