Russia was invading, so a Ukrainian converted his life savings of $10,500 into crypto-token terra. Then, the token crashed.
A Kyiv resident said he converted his $10,500 life savings into a crypto token called Terra, but lost most of it after Terra crashed. STR/NurPhoto via Getty Images
A Kyiv resident wanted to protect his life savings to avoid risk from Russia's war, according to the Guardian.
He put the $10,500 into Terra, a “stable” crypto token that later lost value.
The Ukrainian's account is one of many stories of retail investors burned by the crypto crash.
Yuri Popovich thought it was a good idea at the time.
Russia invaded Popovich's homeland, Ukraine. The Kyiv resident wanted to protect his life savings of about $10,500 from a currency collapse or other war-related risks, he told the Guardian in a report released on Sunday. According to Numbeo, the cost of living in Ukraine was about $467 per person in May.
The International Monetary Fund sounded the alarm in March about rising food and oil prices due to the war. "Higher prices for commodities like food and energy will continue to drive inflation, which in turn will erode the value of income and weigh on demand," the organization wrote in a blog post.
The cryptocurrency market seemed to be 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 response was a form of cryptocurrency, which the Guardian dubs "stablecoin." In theory, stablecoins are backed by fiat currency and hard assets, including government bonds or gold. This is 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, making stablecoins an attractive option.
Popovich chose a stablecoin called Terra.
But Terra isn't your typical stablecoin that's directly tied to a hard asset. Instead, it is 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.
Within weeks of Popovich converting his life savings into Terra, the token went into freefall. In early May, heavy selling of Terra pushed its value lower. This prompted worried investors to sell their Terra holdings as well, creating a scenario similar to a bank run. On Tuesday, a Terra token was worth only about $0.00017.
Experts still ponder what caused Terra's initial dissolution, but some say it was a coordinated attack on the token.
The Terra crash wiped out most of Popovich's savings, and his Terra tokens are now worth less than $500, the Guardian said after seeing screenshots of Popovich's bank account.
Popovich called the amount lost "colossal" and said he stopped sleeping and lost nearly 9 pounds. “I often have headaches and anxiety. My wife still doesn't know about this loss. I don't know how to tell her," he told the Guardian.
Insider was unable to independently verify Popovich's account.
The Terra crash caused the global market value of cryptocurrencies to shrink by $500 billion
Popovich is among thousands of retail investors burned by cryptocurrencies in recent weeks. Terra's free fall compounded fears in the broader cryptocurrency market, which had been reeling from rising interest rates and tightening financial conditions.
The story goes on
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