“Meltdown”, “turmoil”, “financial disaster”. It has been quite a week for the world of cryptocurrencies as markets plummeted and the value of investors' holdings in digital assets such as Bitcoin and Terra rapidly diminished.
Bitcoin was set for a record losing streak while Terra, a stablecoin, collapsed to close to zero on Thursday.
But what happened? Why did the crash occur and is it now over?
What happened to Terra?
Stablecoins, which are pegged to the value of traditional assets such as the US dollar, are usually popular in times of turmoil. They are key elements of the cryptocurrency market and traders park funds in these assets as they move in and out of other digital tokens.
However, Terra slipped below its 1:1 peg to the dollar this week, as global stock markets fell amid rising interest rates and high inflation.
Terra's value is derived by algorithmic processes and it is linked to another paired token called Luna.
Luna fell by more than 94 per cent on Wednesday to almost zero, compared with a high of $119.51, and the blockchain behind both coins twice stopped processing new transactions.
The blockchain’s validators unveiled a software update designed to help avoid attacks on the network.
The largest stablecoin, Tether, also diverged from its 1:1 peg, although marginally.
“The Terra incident is causing an industry-based panic as [it] is the world’s third-biggest stablecoin that couldn’t hold its promise to maintain a stable value in terms of US dollars,” Ipek Ozkardeskaya, a senior analyst with Swissquote Bank, said on Thursday.
“The Terra-USD peg is mostly based on the belief that one could always exchange Luna to guarantee a $1 peg for Terra. But, apparently, that belief is not working any more, and trust is a foremost ingredient in cryptocurrencies' success. So, the level of stress in other cryptocurrencies is mounting.”
Fitch Ratings said that in the case of Terra, the backing entity’s cryptocurrency reserve was not sufficiently large to serve as a source of stability when its algorithmic peg mechanism came under speculative pressure.
“We expect recent developments to lead to increased calls for regulation of stablecoins,” the rating agency said in a note.
How is Bitcoin faring?
The world's largest cryptocurrency has been struggling, too. Bitcoin was at a 16-month low of about $25,400 on Thursday. While it rose close to $30,000 on Friday, it is still way below the $40,000 level it was at a week ago and about 60 per cent below record peaks reached in November.
“Bitcoin has rebounded from $25,424 but this won’t last if risk appetite does not stabilise soon,” said Edward Moya, senior market analyst at Oanda.
“Bitcoin is still vulnerable to one last plunge that could coincide with a stock market sell-off, before many crypto investors feel the bottom is in place.
How is Bitcoin's plunge affecting El Salvador?
It became the world’s first government to make Bitcoin legal tender in September. The idea was to draw more people into the financial system and make it cheaper to send remittances.
However, after the government spent about $105 million buying more than 2,300 Bitcoins, the value is now at about $66m.
The losses are equal to the cash-strapped nation’s next interest payment to bondholders, Bloomberg reported.
Will cryptocurrencies rebound?
Sentiment was generally improving on Friday morning.
“The dust seems to be settling in cryptocurrencies,” Ms Ozkardeskaya said.
“Terra and Luna are now worth almost nothing and probably won’t regain investors’ confidence, and Tether had a mini crash to 0.95, but it recovered fast before things got serious,” she said.
“Bitcoin returned past the $30,000 [level], which is a sign that confidence in the broader sector may not have been damaged as much as we first feared.”
However, analysts also believe that further declines are in store for cryptocurrencies.
“I don't think the worst is over,” said Scottie Siu, investment director of Axion Global Asset Management, a Hong Kong-based company that runs a cryptocurrency index fund.
“I think there is more downside in the coming days. What we need to see is the open interest collapse a lot more, so the speculators are really out of it and that is when I think the market will stabilise.”
How is Hollywood actor Matt Damon involved?
The actor is being criticised across social media for an advertisement he starred in for Crypto.com in October last year.
The advert ran under the tagline “Fortune Favours the Brave”. Mr Damon's financial advice is not looking too sharp right now.
Conflict, drought, famine
Estimates of the number of deaths caused by the famine range from 400,000 to 1 million, according to a document prepared for the UK House of Lords in 2024.
It has been claimed that the policies of the Ethiopian government, which took control after deposing Emperor Haile Selassie in a military-led revolution in 1974, contributed to the scale of the famine.
Dr Miriam Bradley, senior lecturer in humanitarian studies at the University of Manchester, has argued that, by the early 1980s, “several government policies combined to cause, rather than prevent, a famine which lasted from 1983 to 1985. Mengistu’s government imposed Stalinist-model agricultural policies involving forced collectivisation and villagisation [relocation of communities into planned villages].
The West became aware of the catastrophe through a series of BBC News reports by journalist Michael Buerk in October 1984 describing a “biblical famine” and containing graphic images of thousands of people, including children, facing starvation.
Band Aid
Bob Geldof, singer with the Irish rock group The Boomtown Rats, formed Band Aid in response to the horrific images shown in the news broadcasts.
With Midge Ure of the band Ultravox, he wrote the hit charity single Do They Know it’s Christmas in December 1984, featuring a string of high-profile musicians.
Following the single’s success, the idea to stage a rock concert evolved.
Live Aid was a series of simultaneous concerts that took place at Wembley Stadium in London, John F Kennedy Stadium in Philadelphia, the US, and at various other venues across the world.
The combined event was broadcast to an estimated worldwide audience of 1.5 billion.
House-hunting
Top 10 locations for inquiries from US house hunters, according to Rightmove
- Edinburgh, Scotland
- Westminster, London
- Camden, London
- Glasgow, Scotland
- Islington, London
- Kensington and Chelsea, London
- Highlands, Scotland
- Argyll and Bute, Scotland
- Fife, Scotland
- Tower Hamlets, London
Traits of Chinese zodiac animals
Tiger:independent, successful, volatile
Rat:witty, creative, charming
Ox:diligent, perseverent, conservative
Rabbit:gracious, considerate, sensitive
Dragon:prosperous, brave, rash
Snake:calm, thoughtful, stubborn
Horse:faithful, energetic, carefree
Sheep:easy-going, peacemaker, curious
Monkey:family-orientated, clever, playful
Rooster:honest, confident, pompous
Dog:loyal, kind, perfectionist
Boar:loving, tolerant, indulgent
The%20US%20Congress%2C%20explained
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heading
Iran has sent five planeloads of food to Qatar, which is suffering shortages amid a regional blockade.
A number of nations, including Iran's major rival Saudi Arabia, last week cut ties with Qatar, accusing it of funding terrorism, charges it denies.
The land border with Saudi Arabia, through which 40% of Qatar's food comes, has been closed.
Meanwhile, mediators Kuwait said that Qatar was ready to listen to the "qualms" of its neighbours.
Monster
Directed by: Anthony Mandler
Starring: Kelvin Harrison Jr., John David Washington
3/5
Groom and Two Brides
Director: Elie Semaan
Starring: Abdullah Boushehri, Laila Abdallah, Lulwa Almulla
Rating: 3/5
8 UAE companies helping families reduce their carbon footprint
Greenheart Organic Farms
This Dubai company was one of the country’s first organic farms, set up in 2012, and it now delivers a wide array of fruits and vegetables grown regionally or in the UAE, as well as other grocery items, to both Dubai and Abu Dhabi doorsteps.
www.greenheartuae.com
Modibodi
Founded in Australia, Modibodi is now in the UAE with waste-free, reusable underwear that eliminates the litter created by a woman’s monthly cycle, which adds up to approximately 136kgs of sanitary waste over a lifetime.
www.modibodi.ae
The Good Karma Co
From brushes made of plant fibres to eco-friendly storage solutions, this company has planet-friendly alternatives to almost everything we need, including tin foil and toothbrushes.
www.instagram.com/thegoodkarmaco
Re:told
One Dubai boutique, Re:told, is taking second-hand garments and selling them on at a fraction of the price, helping to cut back on the hundreds of thousands of tonnes of clothes thrown into landfills each year.
www.shopretold.com
Lush
Lush provides products such as shampoo and conditioner as package-free bars with reusable tins to store.
www.mena.lush.com
Bubble Bro
Offering filtered, still and sparkling water on tap, Bubble Bro is attempting to ensure we don’t produce plastic or glass waste. Founded in 2017 by Adel Abu-Aysha, the company is on track to exceeding its target of saving one million bottles by the end of the year.
www.bubble-bro.com
Coethical
This company offers refillable, eco-friendly home cleaning and hygiene products that are all biodegradable, free of chemicals and certifiably not tested on animals.
www.instagram.com/coethical
Eggs & Soldiers
This bricks-and-mortar shop and e-store, founded by a Dubai mum-of-four, is the place to go for all manner of family products – from reusable cloth diapers to organic skincare and sustainable toys.
www.eggsnsoldiers.com
UAE%20Warriors%2045%20Results
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Liverpool's all-time goalscorers
Ian Rush 346
Roger Hunt 285
Mohamed Salah 250
Gordon Hodgson 241
Billy Liddell 228
Illegal%20shipments%20intercepted%20in%20Gulf%20region
%3Cp%3EThe%20Royal%20Navy%20raid%20is%20the%20latest%20in%20a%20series%20of%20successful%20interceptions%20of%20drugs%20and%20arms%20in%20the%20Gulf%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EMay%2011%3A%20%3C%2Fstrong%3EUS%20coastguard%20recovers%20%2480%20million%20heroin%20haul%20from%20fishing%20vessel%20in%20Gulf%20of%20Oman%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EMay%208%3A%3C%2Fstrong%3E%20US%20coastguard%20vessel%20USCGC%20Glen%20Harris%20seizes%20heroin%20and%20meth%20worth%20more%20than%20%2430%20million%20from%20a%20fishing%20boat%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EMarch%202%3A%3C%2Fstrong%3E%20Anti-tank%20guided%20missiles%20and%20missile%20components%20seized%20by%20HMS%20Lancaster%20from%20a%20small%20boat%20travelling%20from%20Iran%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EOctober%209%2C%202022%3A%20%3C%2Fstrong%3ERoyal%20Navy%20frigate%20HMS%20Montrose%20recovers%20drugs%20worth%20%2417.8%20million%20from%20a%20dhow%20in%20Arabian%20Sea%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ESeptember%2027%2C%202022%3A%3C%2Fstrong%3E%20US%20Naval%20Forces%20Central%20Command%20reports%20a%20find%20of%202.4%20tonnes%20of%20heroin%20on%20board%20fishing%20boat%20in%20Gulf%20of%20Oman%C2%A0%3C%2Fp%3E%0A
Veere di Wedding
Dir: Shashanka Ghosh
Starring: Kareena Kapoo-Khan, Sonam Kapoor, Swara Bhaskar and Shikha Talsania
Verdict: 4 Stars
6 UNDERGROUND
Director: Michael Bay
Stars: Ryan Reynolds, Adria Arjona, Dave Franco
2.5 / 5 stars
The specs
Engine: 6.2-litre supercharged V8
Power: 712hp at 6,100rpm
Torque: 881Nm at 4,800rpm
Transmission: 8-speed auto
Fuel consumption: 19.6 l/100km
Price: Dh380,000
On sale: now
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