In a significant development, The Algorand Foundation said it has incurred a $35 million USDC loss on its balance sheet on account of its exposure to troubled crypto lending firm Hodlnaut.
The announcement was made on the Algorand Foundation website on 9 September and further broadcasted on Twitter. The revelation by the two-tiered blockchain protocol shows that the impact of the Terra Luna crash is still felt across the crypto space.
But first, a quick recap of the developments for perspective. Hodlnaut’s financial situation turned sour when its $300 million investment in TerraUSD (UST) on the Anchor protocol lost most of its value. This resulted from UST’s de-pegging and the LUNA token’s collapse. The Singapore-based lending firm was forced to stop withdrawals and suspend trading in the face of an acute liquidity crisis.
And how does Algorand come into the picture? The blockchain protocol invested $35 million USDC in Hodlnaut. Most of the investment consisted of locked-in, short-term deposits that became inaccessible following Hodlnaut’s suspension of withdrawals. However, Algorand is “pursuing all legal remedies to maximize asset recovery,” according to the announcement from the Foundation.
Foundation reassures community
The Algorand Foundation is a community-based non-profit organization dedicated to fostering the Algorand ecosystem. Amid the crisis, the Foundation sought to reassure its community, underlining the fact the funds invested in Hodlnaut were surplus to its day-to-day requirements and represent less than 3% of the Foundation’s total value. It was also clarified that the loss would not lead to operational or liquidity issues.
FAQs
What happened to UST on the Anchor Protocol?
As of my last available information, I don’t have specific details on any recent events or incidents related to UST (Terra’s stablecoin) on Anchor Protocol. Crypto markets and protocols can be subject to various changes, and it’s advisable to check the latest news sources, official announcements, or community forums for the most up-to-date information on the situation.
What caused Terra USD to crash?
As of my last available information, I couldn’t find specific details on what caused a crash in Terra USD (UST). Crypto markets can be highly influenced by various factors such as market sentiment, regulatory developments, technological issues, or broader economic trends. It’s advisable to check the latest news sources, official announcements, or community forums for real-time updates on the situation.
How much did investors lose in Terra?
The exact amount investors lost in Terra is challenging to determine as it depends on individual investments and the timing of buying and selling. However, during a crash in May 2022, the stablecoin TerraUSD (UST) lost its $1 peg, and its sister token, Terra (Luna), slumped over 95%. This event resulted in a significant loss of value for investors holding these assets. The crash erased billions in market value almost overnight, impacting the Terra ecosystem.
What was wrong with the Anchor Protocol?
The issues with Anchor Protocol include a loss of confidence in its stablecoin TerraUSD (UST) pegged to the U.S. dollar. In May 2022, there was a crash that led to TerraUSD losing its $1 peg, and its sister token, Terra (Luna), slumping over 95%. This event resulted in a significant loss of value for investors and users of the Terra ecosystem. The crash was accompanied by concerns about the long-term sustainability of the project and raised questions about the stability and security of stablecoins.
