Cryptocurrencies: Why they've crashed and what it could mean for their future

moneycontrol.com:

If you had invested 100 (US$122) in the cryptocurrency Luna a month ago, you might have been quietly confident you'd made a sensible bet. But Luna's value has since fallen drastically at the time of writing, that 100 is worth around 4p (5). Luna was by no means the only victim in a week where cryptocurrencies were down 30%. Some have recovered to a certain extent, but this still represents an aggregate seven-day loss of over US$500 million (410 million), prompting existential questions about the future of the market.

This crash was possibly triggered by a financial attack on the stablecoin Terra (UST), which is supposed to match the US dollar but is presently trading at just 18 cents. Its partner coin, Luna, subsequently collapsed. An attack of this kind is extremely complex, and involves placing multiple trades in the crypto market in an attempt to trigger certain effects which can provide the attacker with significant gains.

In this case these trades caused Terra to fall, which in turn brought its partner coin Luna down too. Once this was noticed, it caused panic, which in turn sparked market withdrawals, which then caused further panic. Some (but not all) stablecoins rely to a large extent on perception and confidence and once this is shaken, big falls can come into effect. Crucially, the recent major falls in cryptocurrencies have called into question just how stable stablecoins really are. After all, they are designed to have practically zero volatility by maintaining a peg to some other underlying asset.

Yet the effects seen this week spilt over in to the whole crypto space, to create single day losses akin to or arguably worse than a Black Wednesday for crypto (Black Wednesday was the day in 1992 when speculators