Terras value is meant to stay at $1.
But it wasnt backed by real-world assets.
Instead, the two tokens were tied in value to one another like a seesaw.
Photo courtesy of Robert Persichitte
One token would be automatically created or destroyed based on the supply and demand of the other.
But why did investors sink so much money into these tokens?
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The machine worked great until it didnt.
Terras algorithm eventually broke theres still some confusion and debate over why and its value started nosediving May 8.
As investors sold off UST, the supply of luna ballooned, causing its price to plummet.
From there, UST and luna locked arms in a death spiral race to the bottom.
By May 12, the stablecoin once pegged at $1 was trading for less than a penny.
Experts say that money is unlikely to return.
Many cryptocurrency investors are now wondering what comes next and how to safeguard their portfolios.
After all, its not just cryptocurrency thats suffering the entire U.S. economy is sluggish.
How To Protect Your Portfolio From Another Crypto Crash: 5 Experts Weigh In
1.
Sometimes people only look at the upside when investing.
No one has perfect foresight.
Thats why its so important to diversify with other assets.
Robert Persichitte, a tax accountant and certified financial planner at Delagify Financial
2.
Most investors are seeing a broad pull back in all their investments right now, including stocks.
Theres not much investors can do in such situations except to keep their portfolios balanced and diversified.
Erik Goodge, a certified financial planner and president of uVest Advisory Group
3.
Be Safe, Be Secure
Employ best practices in diversity, securing your private keys and dont over-leverage yourself.
Know that while this is a setback, its a temporary one.
Eventually, trust will re-enter the market and youll get another shot.
Chris Brooks, co-founder of Crypto Asset Recovery
4.
That makes it easier to ride out the lows and wait for the eventual recovery.
Lance Elrod, a certified financial planner with Next Step Financial Transitions
5.
Cryptocurrency is a highly volatile investment and these types of price swings are to be expected.
The crash in crypto has reminded us why a long-term investment strategy is so important.
The crypto community has even come up with the phrase HODL which means hold on for dear life.
The phrase reminds us that investing in crypto is anything but a smooth ride.
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