Korea's top crypto exchange raises alarm for stablecoins in general

[Photo by Yonhap]

South Korea’s top cryptocurrency exchange market Upbit is advising discretion by local investors against stablecoins in general, warning more than half available on its exchange are in danger of an epic crash in the likes of TerraUSD and its backup crypto Terra Luna (or Luna).

Maeil Business Newspaper has found out of seven algorithm stablecoins listed on Upbit, four volatile to a potential downward spiral, with Waves at the highest risk due to its larger market value than its associated cryptocurrency.

Cryptocurrency Luna’s value tanked after the market cap of its associated TerraUSD stablecoin grew bigger than its market cap. Because TerraUSD uses Luna as a counterweight to maintain its dollar peg, it was inevitable to issue more Luna to match its value with the associated stablecoin. The increased issuance further devalued the cryptocurrency, causing a crash.

Of those trading on Upbit, Reserverights and NEAR Protocol also promise a high interest for keeping the associated stablecoins in their accounts like Luna that paid TerraUSD investors a 20 percent interest for holding the stablecoin in the Anchor Protocol.

On Wednesday, Upbit warned crypto investors of risks of investing in crypto-assets and their associated algorithmic stablecoins. It also put 13 stablecoins pegged to the U.S. dollar, such as Tether and TrueUSD, on its warning list.

“Keeping the underlying asset’s value is essential for an algorithmic stablecoin. A collapse in its underlying asset can cause its devaluation,” said Choi Hwa-in, a blockchain evangelist.

The warning comes as these stablecoins are still at the top of Upbit’s transaction ranking, with investors thronging in for a bet.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]