The demise of the TerraUSD algorithmic stablecoin and its sibling token Luna this week has consequences for the whole crypto community. Terra Luna $45 Billion First, consider the immediate impact: The fast collapse of a once-popular pair of cryptocurrencies sent shockwaves through the sector, leading to collapsing coin values that wiped out hundreds of billions of dollars in market value and fueled concerns about the potential fragility of digital-asset projects.

Then there are the side effects. In addition to punishing individual users and investment firms, the stunning failure of a market darling like Terra threatens to temper the fundraisings that have inflated the valuations of crypto businesses in recent years. Venture capitalists, who have traditionally been some of the industry’s most ardent supporters, may not have the same risk tolerance now – especially those immediately caught in the crossfire.

“It’s something the scale of which crypto has really never seen in terms of a top-five project just absolutely imploding,” said Matt Walsh, founding partner of Castle Island Ventures, a blockchain-focused VC firm. According to CoinMarketcap, the market capitalisation of TerraUSD (also known as UST) and Luna fell by about $45 billion in a week.

Terra Luna $45 Billion There were some winners in this scenario, such as the investment firms that shorted TerraUSD, including F9 Research. Stablecoins backed by reserves rather than algorithms appeared to be superior possibilities as well. But it’s the losses over the last few days that will stick with you.

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