The collapse of Terra (LUNA-USD) has been causing a stir in the crypto market. Most people are wondering the same thing. What’s the difference between a coin like Terra — a stable coin — and a normal cryto token?
Stable coins are different from others because they are paid to a fiat. Many, like Terra. are paid to the U.S. dollar.
No one knows exactly why Terra crashed, but it was massively undercollateralized. And when things started to get uncertain, it saw a massive wipeout because of this.
Instead of running in the opposite direction, Terra’s fall should be a warning sign for other stable coins to become overcollateralized.
Though $40 billion was wiped out in a matter of days, this shows crypto investors to look for coins with superior fundamentals and not just hype.
Some companies are using the crypto market’s tech in value additive ways, while others are just trying to make money.
Terra’s fall means that value destruction can happen to even the biggest cryptos out there. Most won’t be around in five years.
These companies cannot rely on size as a competitive mode. They must rely on quality.
Don’t be fooled by big projects. Look to the underlying fundamentals. Be the sniper, not the shotgun.
You can catch the entire episode at Hypergrowth Investing on YouTube.