Crypto News: Cryptocurrencies Fell By Double-Digits, Tough Time For Everybody, Says Vatsal Kanakiya
Now this was not what the promise of crypto currencies was to investors all across the world and particularly in india, uh yeah. Yesterday i mean actually the last week has been pretty wild. So you know just for some context: uh terra luna. The whole project was around the concept of building a stable coin right. Uh usd was the stable coin pegged to a dollar, which means one ust will always be equal to one dollar and it was not really bad, backed by any actual fiat currency. It was algorithmically stable. What that means is um. They had mechanical mechanisms, you know in their algorithm, which allowed them to maintain that dollar tag that typically happened by allowing a dollar or sorry one usd to always be exchanged for one dollar of luna, which is the other coin right uh. Typically, they expected people to uh, you know find arbitrage whenever the value or the peg of uh ust uh. You know, moved and leveraged that arbitrage to bring it. I im interrupting you and the reason im interrupting is. I want to keep this simple for a vast majority of investors, especially the millennials they didnt know of all of this technicality, and you know it takes time to understand that it is you ust and not usd all of these dollar pegs pretty much artificial, janet yellen Herself has called it out very simple question: why did something get wiped off the face of this earth if crypto was an asset and it was even called a stable coin? Please understand for the general viewer, how has it disappeared um? I guess the simplistic way of putting this would be a bank run.
Okay, just it created panic once it depict the first time, while the uh lfg, which is the foundation which is like a central bank for uh the whole terraluna ecosystem, tried to bring it up before they could a lot of panic in the ecosystem. A lot of shorting a lot of selling, which flooded the whole marketplace and just it became a dead spiral and just crashed and thats fine hold that thought there. A death spiral lets take that point up: chandra a death spiral, a bank run loss of confidence. This wasnt something that was supposed to happen at least a few months earlier before the crypto story started soaring and if i may also add here, this was precisely what the indian authorities seem to have been warning off record and on record shara chandra yeah. So i think we have to make a clear distinction between the stable point what were discussing here. There are two types of stable points. One is collateralized has been backed by certain assets, lets, say usdc, which is backed by uh, the us dollar reserves. So similarly, in case of non collateralized or algorithmic stable points, because theres no underlying asset backing these stable points, so they are more prone to bank runs or more prone to redemption risk. And what happened here is uh. There was an algorithm which was determining the supply supply and again the price was linked to that, and since this is not the first time a stable point has failed.
If you look at the recent past two years ago, the same founder group, one was also involved with uh a stable coin called basis cash and it also failed and uh. Last year, uh mark cuban one of the recent one of the prominent investors at shark tank. He also lost a fortune in another stable point called iron.