One of these, Terra USD, which had a market capitalisation of around $ has collapsed completely. An algorithmic stablecoin, its mechanism for maintaining its value to the dollar was maintained by algorithmic buying and selling of another crypto-asset, Luna and supplemented by a reserve of Bitcoin. When the price of Luna (and Bitcoin) fell sharply, confidence in Terra’s ability to maintain the peg eroded, leading to a run on the stablecoin and its complete collapse. At this point, another familiar amplifier of financial market stress – contagion – entered the picture. The collapse of Terra put a spotlight on the adequacy of the backing of other stablecoins,  Page 4  particularly the adequacy of the real economy reserve assets backing the largest stablecoin, Tether, which suffered significant outflows and, on several crypto exchanges, broke its peg to the dollar – meaning many coinholders were not able to redeem at par. A further example is the inherent risk that comes with leverage – a familiar one given its role in many financial crises. Leverage is a powerful tool in financial markets, but leveraged positions can greatly amplify losses when asset prices move against investors, driving fire sales of assets and self-reinforcing downward price spirals. In recent years, we have seen the small but growing development of exchanges and other mechanisms in the crypto world, like DeFi platforms, which have given investors – retail and wholesale – the ability to take very highly leveraged positions.
Using as a starting point the observed heterogeneity and by analysing the experiences of several countries, we can draw certain broad conclusions on the effectiveness of the macroprudential toolbox. The design of Borrower and Capital Based Measures is a decision of authorities. For example, based on information from the ESRB, Belgium introduced a Loan-to-Value on both owner-occupied and buy-to-let properties. Cyprus, in order to deal with a specific sectoral exposure, further to the Loan-to-Value cap, recently introduced an even stricter Loan-to-Value for luxurious properties. However, by observing the real estate cycles registered in a number of countries, it is evident that even the idiosyncratic design of these measures does not always stop real estate cycles from materialising. The Netherlands and Slovenia are examples of countries that have recorded vulnerabilities despite the implementation of such measures. Analysis performed at the Central Bank of Cyprus verifies this observation. Using an econometric model, we explain the growth rates of housing loans and house prices considering the implementation of macroprudential measures2. 1/3  BIS - Central bankers' speeches  The analysis indicates that the Loan-to-Value ratio seems to be effective in containing housing loans, for 10 out of 12 countries in our sample and effective in containing house prices in only in 3 out of the 12 cases. Income based measures (such as DebtService-to-Income) and Capital Based Measures were found to be effective in around half of the countries that use them. We can therefore conclude, that there is no "one-size-fits-all" type of macroprudential tool.