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Citibank and Goldman Sachs Speak On UST's Collapse
Summary: Citibank and Goldman Sachs, two banking giants, released statements regarding the crash of cryptocurrency’s third-largest stablecoin, TerraUSD (UST), which went from $1 on May 9 to $0.0938 at the time of writing, according to Bitpush Terminal data. In addition, Terra network’s own stablecoin, LUNA, went from $61 on that same day to now $0.000202. Citibank’s ...
Citibank and Goldman Sachs, two banking giants, released statements regarding the crash of cryptocurrency’s third-largest stablecoin, TerraUSD (UST), which went from $1 on May 9 to $0.0938 at the time of writing, according to Bitpush Terminal data. In addition, Terra network’s own stablecoin, LUNA, went from $61 on that same day to now $0.000202.
Citibank’s note, reported by Coindesk, said it does not expect a broader economic fallout because the digital-asset market is still relatively small compared to traditional asset classes. Analysts from Citi concluded that there was no apparent “lead effect” from Bitcoin (BTC) to S&P 500 index futures.
Goldman also came out with their own report Monday, reported by The Block, arguing that in order for algorithmic stablecoins to have a long-term future, they need wider adoption for payments in the real economy. This will give them utility in the real world, other than being another way to store money.
“Stablecoins have limited use as a payments medium at this time. If that real-world use case were to grow over time, it could create a more stable demand base for these assets,” the investment bank wrote in a research report dated Monday. “Hypothetically, an algorithmic stablecoin could survive in the long-run, if it were to have ongoing transaction-related demand.”
Stablecoins fulfill a need. They allow investors to trade into a less volatile asset without converting to fiat currencies. According to Goldman, people that have traded foreign currencies are familiar with the vulnerabilities affecting stablecoins.
Since the UST and LUNA collapse, crypto has been going through it. Bitcoin is hovering around the $30,000 mark, while the second largest cryptocurrency by market cap, Ethereum, has followed Bitcoin’s trajectory but on a much smaller scale. In addition, Treasury Secretary Janet Yellen called for regulations on stablecoins by the end of the year.
Author: Tyler Irvin
