Binance Founder CZ’s Suggestion for Terra’s Risk Reduction


The post Binance Founder CZ’s Suggestion for Terra’s Risk Reduction appeared first on Coinpedia – Fintech & Cryptocurreny News Media| Crypto Guide

Looking at the graph of the Cryptocurrency market nowadays, it looks unsafe in all possible directions. As Bitcoin and ether are at their lowest point since 2020, altcoins, dogecoin, and  Cardano are falling even worse. Virtual Currency volatility, and tempestuous economic conditions are affecting not just cryptocurrency, but also the stock market. This unprecedented dive is really painful for crypto investors.

The collapse crypto Luna and its associated terraUSD stablecoin were really Unexpected. whereas many of us were unknown to UST before, and what actually the stablecoin stands for. It’s a big deal, as billions of dollars in crypto wealth have been vaporized by their diving shockwaves throughout the market.

The stablecoin UST and Luna are part of the terra blockchain, whereas the UST coin is designed to retain a value of $1 at all times, which was unfortunately depegged to just 13 cents on May 9.

The centerpiece of Terra’s ecosystem Luna has lost its value and the collapse was recorded as one the most stunning ever recorded crypto crashes.

The fall recorded was from $116 to a fraction of a penny, such implosions have been seen in small-cap memecoins in the past, but never for the size of Luna, with a market cap of over $40 billion.

A Binance official blog chain reacting to this loss, says high yields do not necessarily mean a healthy project. The official blog also discloses the lessons learned from the UST/LUNA crash, including its design and flaws.

Attempts to restore such UST pegs are incorrect, as they have spoiled the crypto ecosystem, which is resilient. There is no need for more guidelines on how to regulate stablecoins, and how to avoid the similar systemic risks in the future, says Binance.

The Chengpeng Zhao reacting to this implosion of stablecions, gives three suggestions to reduce the systemic risk.

His first suggestion for the investors is:

“As an investor , you need to diversify your investment portfolio, don’t put all your savings in one basket, even if the project has high-profit potential,”

The next was to be aware of high investment risks saying:

” keep away from investment projects with ultra-high returns because high returns are difficult to sustain, and high returns are equivalent to high risks,” 

And, lastly he suggesting to be keep yourself updated with the knowledge about financial systems:

” Most importantly, keep improving your knowledge and learn financial knowledge every day, such as visiting Binance Academy.”