The new currency is not for the faint of heart…
As thrilling as this new technology is, it’s not worth the jerky and unpredictable movements.
Some folks thought they found a way to ride the cryptocurrency roller coaster and minimize wild drops by investing in stablecoins. The concept behind stablecoins is that they are supposed to maintain a certain value. They are promoted as less risky relative to the volatility of investing in other cryptos, such as bitcoin or ethereum.
That promise of stability failed to deliver when terra, also known as UST, imploded. It was designed to maintain its value of $1.
It didn’t.
Not by a long shot.
Even the most popular stablecoin in the world, tether, dropped below its price of $1 in May. Online you can find postings on Reddit and Twitter from people distraught and surprised at their spectacular losses after betting big on terra.
“It’s very important to prepare yourself psychologically” for “the loss otherwise mental issues make it even worse,” one Reddit user wrote.
I like to use times like this as a teaching moment. Before you put your money in stablecoin, you need to ask yourself a lot of questions, because this isn’t a ride for the financially faint of heart.
Here is how to tell if you have the stomach for the roller coaster ride of any cryptocurrency, particularly stablecoin.
You understand that stablecoin investing is just as risky as other cryptocurrencies. As an asset class, stablecoins purport to be stable. But the very name is a misnomer…
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You understand the difference between investing and gambling. You should never put all your money in one stock or asset class and certainly not in something as highly speculative as cryptocurrency. I asked Terraform Labs, the company behind terra, about reports of people investing their life savings and losing most of their money.
Terra was “designed as a medium of exchange, not an investment,” a Terraform Labs spokesperson said in an email statement. “We were clear with the public about the risks involved in UST. As with virtually everything else in life, each individual must decide for themselves what risks they are willing to undertake.”….