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Aaron Brown

TerraUSD's Struggles Are a Concern for All Markets

If the stablecoin fails, it will be a blow to the many traditional financial institutions that rely on liquidity to maintain stability. 

The cryptocurrency market has hit a rough patch.  

The cryptocurrency market has hit a rough patch.  

Photographer: Marco Bello/Getty Images

Financial markets and top US regulators have been focused on the struggle in recent days by the TerraUSD algorithmic stablecoin to return to its $1 peg after dropping to under 70 cents on Monday. Investors should care about the story, not for what it says about crypto but for what it says about liquidity in all financial markets.

Most of the coverage of cryptocurrency concerns the US-dollar prices of crypto assets. This is like trying to understand the US economy by looking only at the value of the dollar in the foreign-exchange market. There is an extensive crypto economy backed by hundreds of billions of dollars of development effort, which delivers services to end users every day. Its success depends on the value of those services, and the new services to be introduced to current and future users.