- A Kyiv resident wanted to protect his life savings to avoid risks from Russia’s war, per the Guardian.
- He put the $10,500 sum into terra, a “stable” crypto-token that later crashed in value.
- The Ukrainian’s account is one of many stories of retail investors being burned by the crypto crash.
Yuri Popovich thought it seemed like a good idea at the time.
Russia was invading Popovich’s home country, Ukraine. The Kyiv resident wanted to protect his life savings of about $10,500 from a currency collapse or other risks related to the war, he told the Guardian in an account published Sunday. It’s estimated that the cost of living in Ukraine was about $467 per person in May, according to Numbeo.
The International Monetary Fund sounded the alarm in March about how food and oil prices were increasing because of the war. “Higher prices for commodities like food and energy will push up inflation further, in turn eroding the value of incomes and weighing on demand,” the organization wrote in a blog post.
The cryptocurrency market seemed on a stratospheric ride, Popovich thought, so why not convert his savings into these digital tokens to store their value?
According to the Guardian, the Kyiv resident’s answer was a form of cryptocurrency called a “stablecoin,” per the Guardian. Theoretically, stablecoins are backed by fiat currency and hard assets, including government bonds or gold. This is supposed to prevent the tokens from becoming too volatile.
“It was impossible and unsafe to store funds in the form of banknotes,” Popovich told the outlet, which made stablecoins an attractive option.
Popovich chose a stablecoin called terra.
But terra isn’t a typical stablecoin tied directly to a hard asset. Instead, it’s an algorithmic stablecoin, meaning it uses algorithms to peg itself to a fiat currency or asset.
Earlier this month, terra’s algorithm lost its peg to the US dollar, and the stablecoin’s value plummeted.