These days are unpleasant, but also interesting. The courses collapse brutally, investors make huge losses. The ground trembles, the markets shake. LUNA is destroyed, Bitcoin falters - and what happens next?
Unfortunately, this is also part of my job as a bitcoin and crypto blogger. What rises too steeply falls steeply, and as nice as it is to write about skyrocketing prices, it is bitter to talk about collapsing prices. But what has to, has to: a post with impressions of the big crypto crash 2022, which officially broke out on Monday night.
It was the perfect storm. A pinprick; the volley that capsizes the steamer.
The market was already unenthusiastic, to say the least. The $3 billion Do Kwon bought for the UST reserve had moved disappointingly little, El Salvador's bitcoin bond continues to be postponed, and overall news for the past few months has been mixed.
Then everything shook like an earthquake. The ground shook - and UST and LUNA toppled over. I have never seen such a brutal annihilation of a major cryptocurrency.
The destruction of LUNA
First, the stablecoin UST — of which there are 18 billion units, each said to be worth $1 — lost dollar parity. It tumbled to a low of under 30 cents but is now at just under 60 cents.
Due to the mechanics by which UST was supposed to hold value, LUNA, the underlying currency of the Terra blockchain, collapsed along with it. And now it's getting really brutal.
Price of Terra, also according to Coinmarketcap.com.
Luna plummeted from $82 to 4.5 cents in a week. The coin lost 90 percent to be at $8.20, another 90 percent to be at 82 cents, another 90 percent to be at 8 cents, and then on... It's brutal. The coin lost 99.5 percent of its value in just a few days. It can go that fast.
It's hard to believe how extensively and completely a cryptocurrency can fizzle out that was previously stable. It's so hard to grasp that some have no choice but to flee into conspiracy theories.
The first salvo hits
Cardano's Charles Hoskinson, for example, posts a screenshot with a messenger message on which Anna rolls out a conspiracy theory.
He later deletes the tweet, which is why I don't include a link to a screenshot. I'm not trying to embarrass Charles. Rather, I think you have to have a distinct lack of imagination to spit out an interesting theory in an instant because it might be conspiracy.
The theory goes something like this: Blackrock and Citadel borrowed 100,000 Bitcoins from the US exchange Gemini. Of these, they exchanged 25,000 for UST. They then arranged an OTC trade with Do Kwon, which is an over-the-counter trade that does not affect prices, for BTC to buy a large amount of UST. Do Kwon assumed the trade happened – and at the same time, Blackrock and Citadel dumped both BTC and UST on the market, causing massive price shocks. Blackrock and Citadel can buy the bitcoins cheaply and return them to Gemini. What is left remains as profit.
I very much doubt there is any truth to this theory. Blackrock has already denied them, as has Gemini. Nevertheless, one should allow the thoughts in it their moments.
For example, suppose the following: A genius and massively funded adversary of bitcoin—one of the adversaries that bitcoin should be able to defend against—plans an attack against bitcoin and crypto. He couldn't have opened better than with that shot at UST.
The steamer was already groaning in the storm when Do Kwon opened a flank with the Bitcoin reserve. The attackers attacked. A strong salvo was enough to send bitcoin plummeting. The suction waves pull everything far and powerfully with them.
Whether attack or accident, whether the volcano erupts because it erupts or because it is blown up - the result is the same.
After the first carnage
It hasn't been this cheap to buy Bitcoins since early 2021. We are at a low of a good 23,000 euros.
Ethereum, on the other hand, has yet to bottom out in July 2021; until the price at the beginning of 2021 - around 500 euros - there is still enormous scope downwards. In that sense, Bitcoin has already further reduced the bubble.
The crypto unicorn index is falling to its lowest level since February 2021. That's actually a pretty good sign. All the grossly overvalued unicorns - coins and startups valued at more than a billion dollars - were too much.
The unicorn index according to blockchaincenter.net
The Slaughter Among the Unicorns shows a bubble dissipating. At the same time, the trading volume is increasing, with many coins moving from exchange to exchange. The market is in the state of emergency it needs to reverse a trend. Trading volume on uniswap.info has increased six-fold to $6.6 billion (the highest ever!). It also increases significantly on Bitcoin.de.
There are signs that the market is finally finding the bottom: first signals that a “cleansing storm” is raging.
Still bloated
But, let's be honest: There's more to it than that. A unicorn index of 59 is still high. Do you even know 59 cryptocurrencies?
Is zcash, a forever unused privacy currency, worth $1 billion? The unused blockchains Tezos, Filecoin, Hedera, VeChain, Elrond, Algorand, Flow, Stellar, Bitcoin Cash, Cronos? All this and more seems questionable. Many of the coins could lose unicorn status if their price falls by 10-30 percent, and no one would really suffer except traders.
Coins like Litecoin may have a right to exist as a unicorn, as a backup to Bitcoin, Dogecoin, if you like, as the one true memecoin, and if you like, some of the classic “Ethereum killers” that have positioned themselves (or are building alternatives) as a pillar of the EVM ecosystem.
What about the DeFi swap shop PancakeSwap? The Theta Network? Decentraland's virtual floor? The game Axie Infinity? The token ApeCoin and Shiba Inu? Unicorns?
The top 60 still look a bit bloated. But they seem a lot more sane than they have over the past 15 months.
Record amounts are being transferred on the blockchains, exchanges are reporting the largest outflow of coins in a long time. Something is moving.
movement is good. Because movement relieves tension. It goes on - and it has to go on for Bitcoin to hit the bottom. A blister does not heal without pain.
Maybe the bottom is slowly coming into view. Most prominent trading voices, exchange bosses who should know what they're talking about, expect it to probably go to but no lower than a little under $20,000. That would be around 16,000 euros.
The rainbow chart, also on blockchaincenter.net.
According to the rainbow chart, the final sale would also take place around this house number. You couldn't get a bigger discount.
The second wave
But what would the second move be? What if someone plotted not just to discard bitcoin — but destroy it? Or if, analogous to the conspiracy theory, there is an accident whose cause has long existed?
When uptrends like the rainbow chart are broken, confidence in Bitcoin wanes. The stock-2-flow model is likely to be considered a failure. While its proponents, like PlanB, say it hasn't failed yet because the timeframe is longer (or something), they also concede that what was true in the past no longer fits the present so well , as would be expected from an accurate model.
What works once, works again and again - until it no longer works.
So what would the second prank look like?
The goal is known
If algorithmic stablecoin UST, with a market volume of $18 billion and operating more in the niches of the market, was the appetizer - then it is obvious what is served as the main course: the traditional stablecoin Tether, with a market capitalization of just over 82 Billions of dollars if not THE mainstay of the entire ecosystem.
Tether has been said for years - since at least mid-2017 - to be insufficiently or not at all covered, and Bitfinex is using it to manipulate the market. The drop here is simply too great not to at least listen to such rumours. Typically it says something like this:
“If Tether decouples, then crypto is effectively dead. We could see crypto die as early as this month.”
So far it's going like this: Tether holds parity with the dollar. The critics say Tether remains stable. Sometimes Tether brings an audit or report. The critics criticize the audit or report. Tether remains stable. It's been like this for 4-5 years.
But what if… it would be the perfect storm if Tether loses parity now like UST. And that's exactly — that's exactly what happened early this morning:
On the exchanges, the price of USD – meaning dollars in a bank account – and USDT folded apart. In a brief dip, Tether fell to $94.5 cents, but recovered from there to currently just over 99.5 cents.
The usual "Tether-Fudder" and "Buttcoiner" celebrate. I don't mean people who are critical of bitcoin. This means people who openly hate Bitcoin and crypto and who, for whatever reason, have made it their mission to rant against crypto almost continuously for years, and for whom it is like Christmas, birthday and Easter all at the same time , when crypto investors lose billions of dollars.
In the crypto scene, on the other hand, the prospect spread little cheer. At least under the hashtag #tether, some of the concerns are already turning to panic. However, Tether appears to be holding its balance, at least for now.
There is much to do
Is there something to it? What awaits us? Was that the low point, or is it going a little lower? Or does it go so deep that “crypto” is virtually destroyed?
I can't give you an answer to that. I don't trade, and when I trade I usually lose; I can't achieve the coolness that traders need because I can't shut out feelings like fear and desire.
So — I have no idea how to proceed. I'm the last one you should ask. If I had to guess, I'd say it's probably happening something similar to what's happened in the past: we find a bottom somewhere, really maybe just under $20,000.
The bubble was huge. She burned a lot. But she also built and created a lot. Much of it has burned with it, but much will remain. With Bitcoin as a cash reserve, Lightning, DeFi, NFTs and DAOs, the ecosystem has more than one building site for thousands of busy hands to build on. There is much to do and there will be no shortage of business opportunities.
But that doesn't happen overnight. It takes patience.
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