Billions have been wiped off the cryptocurrency market this week following the collapse of the Terra, the so-called "stablecoin" that was established to retain a fixed value and act as a safe harbour for investors.
The value of Terra, which is governed algorithmically by "smart contracts" to stay around the $1 mark, has now dropped to less than a cent as investors looked to cash out while the value of its sister token Luna, which was created to help prop up the value of Terra, also collapsed to zero.
What was styled as a banking reserve to help govern the wider crypto market has now been called a Ponzi scheme and crypto's Lehman Brothers moment, with major cryptocurrencies also falling precipitously in its wake.
After trading at more than $58,000 in November and around $37,000 for much of the past month, the value of Bitcoin has now dropped below $30,000, and the collapse of the cryptocurrency market comes after several consecutive weeks of losses for major tech stocks.
The S&P 500, which features the likes of Alphabet, Amazon, Apple, Meta and Tesla, is close to completing its sixth successive week of decline amid concern about inflation and rising interest rates, with the index having lost nearly 20% of its value since January.
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So, what has been trading well in recent months? Well, energy companies primarily. Occidental Petroleum, the Houston oil and gas company, has seen its share price nearly double so far this year, with earnings of $4.7bn for the first quarter.
Mosaic Company, which mines phosphate and potash for agriculture, has seen its shares rise around 60%, and this month reported improved earnings of $1.45bn for the first three months of the year.
Oilfield services company Halliburton saw an 85% increase in first-quarter adjusted profit, with the rally in oil prices and rising demand leading to more drilling. The company has some 673 US rigs in operation, up 15% from late 2021, and its shares have risen by more than 50% this year.
Likewise, oil producer APA Corporation reported earnings of $1.9bn for the first quarter after increasing production to 404,000 barrels per day. Like Halliburton and Marathon Oil, which reported quarterly net income of $1.3bn, its shares have risen more than 50% so far in 2022.
Its a similar story for the likes of Coterra Energy, Valero Energy, Exxon Mobil, Hess Corp, CF Industries Hildings, and Chevron Corporation -- all oil and gas companies that have experienced stock growth of more than a third as demand and prices have risen while the western world turns its back on Russian energy due to the war in Ukraine.
Although Terra may soon be no more, Tether, the biggest stablecoin, has recovered to the dollar mark after coming under pressure this week. Its developers say it is backed by dollar assets rather than an algorithm.
(Pic: Getty Images)
