Mike McGlone, a Senior Commodity Strategist at Bloomberg Intelligence, shared his thoughts on the collapse of UST stablecoin in a recent interview.
McGlone said the UST price collapse was a warning to the rest of the crypto industry on the dangers of algorithmic stablecoins.
Terra’s UST stablecoin, which most investors originally thought to be pegged to the value of $1, underwent a price collapse that tanked the crypto markets across the board. As we now know, this was a result of an eponymous coordinated attack on UST. The attackers, whoever they were, made a fortune within a day or two. Their income could have been as much as $800 million.
UST collapse was anticipated
“One thing that’s notable here is that this is part of the ebbing tide of risk assets… when the tide goes out, you see who’s wearing clothes, and we found out algorithmic stablecoins that are based on a market that needs to go up weren’t the best idea,” McGlone said.
Bloomberg strategist called algorithmic stablecoin TerraUSD’s collapse “unfortunate” but not unexpected.
He thinks the bubble-like conditions of the crypto markets are to blame.
McGone also said that Terra’s fall is ‘what we’ve been expecting and hoping for.’
He noted that the market needs to purge overextended cryptoassets which have ballooned over the last two years.
And then he pointed to Shiba Inu (SHIB) and Dogecoin (DOGE) as two “ridiculous” examples of crypto excess.
McGone thinks that flushing the crypto market of nonsense projects is good. It would result in crypto getting back to “really building the foundation” that would ultimate transform technology and finance.
Time for Bitcoin maximalism?
According to some analysts, the ongoing crypto crash is a good time to rethink the altcoins and, probably, stablecoins. As soon as the market get shattered for whatever reason, Bitcoin stands as a rock, with volatility being its only problem. Other cryptocurrencies are never able to live up to the expectations.
May 2022 is clearly sending signals to Bitcoin maximalists. Once again Bitcoin proves to be the only crypto that is suitable for long-term investments.
If McGone is right about cleansing the crypto market of unnecessary projects, we will definitely see a much more Bitcoin oriented market as a result.