Just as Popovich’s home country, Kyiv, Ukraine, was being invaded by Russian forces, the Ukrainian citizen had an urgency to protect his life savings of about $10,500 from the risk of currency collapse and other war risks. He did what he thought was the safest option and converted it into the stablecoin Terra…
The International Monetary Fund announced in March that oil and food prices around the world would be increasing due to the war. In a blog post they wrote, “Higher prices for commodities like food and energy will push inflation further, in turn eroding the value of incomes and weighing on demand.”
To Popovich, the crypto market seemed boundless, so why shouldn’t he convert his savings into a digital token?
Popovich was mainly considering a type of digital currency called a stablecoin, which, theoretically, is a coin that is meant to retain a set value pegged to a fiat currency or hard asset. This prevents the coin from any volatility.
Popovich told The Guardian, “It was impossible and unsafe to store funds in the form of banknotes,” making a stablecoin an attractive option.
So Popovich decided to use Terra, a popular stablecoin at the time.
The problem is that Terra is untraditional and a bit experimental with their method of stabilization as the coin depends upon an algorithm.
Earlier this month, Terra’s algorithm failed and lost its peg to the U.S. dollar, and quickly the stablecoin’s value plummeted.
Within the few weeks of Popovich converting his entire life savings into the stablecoin, the token went into a free fall. In the beginning of May, heavy selling forced Terra’s value to what is now below $0.00015.
Popovich’s life-savings is now worth less than $200.
Experts are still debating what caused the tokens to plummet and some speculate it was a coordinated attack.
Popovich called the loss “colossal” and expressed that he “stopped sleeping and lost almost 9 pounds.” “I often have headaches and anxiety,” he told The Guardian. “My wife still doesn’t know about this loss. I don’t know how to tell her.”
Terra’s Negative Ripple Effect on the Market
Popovich is far from alone in his situation. There have been millions of nonprofessional users, known as retail investors, burned by the recent crypto market trends in the past few weeks. Terra’s freefall exacerbated fears in the broader cryptocurrency market, which had been reeling from rising interest rates and tightening financial conditions.
The cryptocurrency market has lost about $500 billion since Terra unraveled in May, according to data provided by CoinMarketCap.
The crash has prompted many Reddit users to share the numbers of suicide hotlines from across the world, while others emphasized, “don’t invest money you need to survive/live the next weeks/months/even a year.” “Don’t invest in the hopes of having more next month. This is a very volatile market nobody knows what’s gonna happen next.”
Even Changpeng Zhao, billionaire and founder of the world’s largest crypto exchange, Binance, joked last week that he was “poor again” after the company’s holdings in Luna, sister token to Terra, crashed to around $2,200 from $1.6 billion.