The topic of cryptocurrencies has been one of the most recurring topics in recent days. More and more regulators, institutions and central banks are talking about these types of assets and the outlook is not as positive as expected. Recently, the International Monetary Fund president, Christine Lagarde, assured in a meeting held on Monday that stablecoins are a pyramid scheme.
She was referring to cryptocurrencies that are backed by stablecoins such as the dollar and that theoretically have a value of 1 to 1 with the currency it supports. To illustrate this situation, Christine Lagarde alluded to the impact of the collapse of Terra and Luna in recent days, which highlighted the apparent reality of stablecoins occupying a very important place in the cryptocurrencies, but also in the economic system. .
The Terra recently lost parity with the US dollar. It’s a situation that started at the beginning of the year and caused Luna to fall to one of the lowest points that no one really expected. If it were to be a stablecoin, it should maintain parity with the currency it is pegged to, which in this case was the dollar, but it didn’t.
The fall of Luna caused one of the most severe drops the market has seen in recent months. During the cryptocurrency sell-off, the market lost hundreds of billions of dollars in market cap, leaving investors of various levels with significant losses.
For regulators, central banks and institutions related to the economy, this situation has exposed the problems related to stablecoins, as well as to the global market. Therefore, they are trying to take measures to stop the conflicts that the use of this type of cryptocurrency can cause among investors.
Cryptocurrencies under the microscope
In the words of Christine Lagarde, when we look at stablecoins in a period of chaos like this, it is quite easy to see the reality of this asset class. Here’s what she said during a panel discussion at the World Economic Forum in Davos, where she explained that stablecoins are backed by a single asset and that if someone promises a 20% return, it’s a pyramid.
This is not even the first time something similar has been said about cryptocurrencies. The IMF chairman’s comments come after the European Central Bank president gave a televised interview last weekend in which she claimed cryptocurrencies had no value.
Along the same lines, the chief investment officer of Guggenheim Partners said bitcoin could fall further. If it’s currently hovering around $30,000, he said it could soon be worth around $8,000, causing a serious crisis in the market. He further stated that most cryptocurrencies are nothing more than “mess†
Also, the idea that stablecoins are a pyramid scheme is not far from Bill Ackman’s comments, who said they are a crypto version of old schemes. He said that when he read about Terra, he noticed it as a pyramid cryptocurrency where investors are offered a 20% return that will be generated by the demand and momentum of new investors.
So far, the Terra issue has been one of the biggest shocks to the cryptocurrency market and caused regulators to turn their eyes to cryptocurrencies, but not in a positive way. Some market analysts are pretty sure that a total market crash is coming and if this is real, the losses could be incalculable and leave the market in a pretty dark moment.
Other analysts say this is just a downturn and the market may soon recover as it has in the past. But the recovery will depend on a number of factors, one of the most important being the regulation of cryptocurrencies, which is getting a bit stricter than what has been talked about in the past.