The Washington Post has published an article by author Michelle Singletari warning against investing in so-called stable cryptocurrencies, saying that they are not stable and no better than other cryptocurrencies such as Bitcoin and Ethereum.
She explained that her personal experience with investing in stable cryptocurrencies reminds her of riding on a roller coaster with all its sudden ups and downs, and confirmed that she has stopped investing in these currencies.
She also explained that the concept behind stablecoins is that they are supposed to maintain a certain value, and have been promoted as being less risky and less volatile compared to other cryptocurrencies, such as Bitcoin or Ethereum, but this assumption was not fulfilled, and it failed in public when it exploded Terra, also known as UST, is a coin that was designed to maintain its $1 value and did not.
She noted that even the world's most popular stablecoin, Tether (USDT), fell below its $1 price in May.
Online, you can find posts on Reddit or Twitter from people stunned by their huge losses after the big bet on Terra.
The writer advised her readers to ask themselves, before putting their money into a “stable” cryptocurrency, a lot of questions, because this is not a trip for the financially faint of heart.
She said that stable cryptocurrencies claim to be stable, but the name itself is a misnomer, says Joe Rotunda, CEO of the Texas State Securities Board, adding that there is no guarantee that it will be stable, as the person who bought “Terra” recently could lose much more. Than if he had bought one of the mainstream cryptocurrencies, “If you invest your money in Terra thinking it is a stable currency, and won’t fluctuate like Bitcoin, you will lose quite a bit of money.”
Rotunda added that people should not, without scrutiny, take any type of cryptocurrency or any type of investment as safe.
There are risks involved, even with stablecoins.
She went on to tell readers, "You understand the difference between investing and gambling. You should never put all your money into one stock or asset class and certainly nothing comes close to gambling like cryptocurrency."
She said she asked Terraform Labs, the company behind Terra, about reports that people had invested their life savings and lost most of their money.
The company responded that Tera was designed as a medium of exchange, not an investment, stressing that it "has been clear with the public about the risks involved in this currency. As with almost everything else in life, each individual must decide for themselves what risks they are willing to take."