The Sonic blockchain is progressing with the development of its yield-providing, algorithmic stablecoin amid concerns regarding a possible downturn akin to the Terra-Luna crisis that resulted in the sector’s most extended crypto winter.
Algorithmic stablecoins utilize code-driven systems to maintain their price consistency, as opposed to fiat stablecoins that are directly linked to the value of the respective currency.
In a March 22 post on X, Cronje stated:
“POC appears promising. Yielding > 200% APR @ 10m tvl, around 23.5% APR @ 100m, steady at about 4.9% at 1bn+. Will scale and assemble a team for a complete launch.”
Source: Andre Cronje
The revelation came the day after Cronje acknowledged facing Post-traumatic stress disorder (PTSD) related to algorithmic stablecoin due to past experiences:
“Pretty certain our team has solved algo stable coins today, but past cycles left me with significant PTSD, so I’m unsure about implementing it.”
In May 2022, the $40 billion Terra ecosystem crumbled, erasing tens of billions of dollars in value within days. Terra’s algorithmic stablecoin, TerraUSD (UST), was providing an annual percentage yield (APY) above 20% on the Anchor Protocol.
As UST deviated from its dollar peg, plummeting to approximately $0.30, Terraform Labs co-founder Do Kwon took to X to announce his rescue strategy. Concurrently, the value of the sister token LUNA, which once ranked among the top 10 crypto projects by market capitalization, fell by over 98% to $0.84. LUNA was trading over $120 in early April.
Related: Sonic TVL increases by 66% to $253M since the rebranding from Fantom
Sonic claims to be the quickest Ethereum Virtual Machine (EVM) chain, boasting a “true” 720 milliseconds (ms) finality — the guarantee that a transaction cannot be reverted after being recorded on the blockchain ledger.
Sonic has attracted significant attention in the cryptocurrency realm since its testnet achieved a 720 ms finality on September 8, 2024.
Related: FTX liquidated $1.5B in 3AC assets two weeks prior to the hedge fund’s collapse
Investors continue purchasing collapsed LUNA token years after Terra crash
The Terra (LUNA) token has experienced a decline of over 98% from its peak of 19.54 recorded on May 28, 2022, nearly three years ago, as per CoinMarketCap data.
LUNA/USD, all-time chart. Source: CoinMarketCap
Notwithstanding the collapse, the token recorded over $21 million in trading volume within the past 24 hours, indicating that “individuals are still purchasing it even though it’s defunct,” observed well-known technical analyst Optimus KevTron.
The downfall of the algorithmic stablecoin issuer caused significant disturbances among both crypto investors and regulatory officials.
To enhance stability, the European Union’s Markets in Crypto-Assets Regulation (MiCA) bill is set to ban the issuance of algorithmic stablecoins to prevent another collapse similar to that of the Terra ecosystem.
Magazine: Victims of ‘Hong Kong’s FTX’ succeed in their lawsuit, bankers criticize stablecoins: Asia Express
