I say "the price people were willing to pay" instead of "value", because now that nobody wants to speculate with LUNA, it did fall down to its intrinsic value: Practically zero. Nobody needs it for anything besides buying and selling it from and to other people, which is not happening anymore.
Cryptocurrency is gambling, plain and simple. The difficulty that fiat currency faces is inflation, which roughly means diluting the economy that backs it too much. The difficulty with cryptocurrency is that there is nothing of worth backing it. Factor in the horrifying externalities, and its worth is negative.
For Bitcoin, the most popular one, on the order of 100.000.000.000.000.000.000 of hashes get calculated to mine a single block, multiple trillion per second. Within ten minutes, only a single one of those 100.000.000.000.000.000.000 hashes is actually used, depending entirely on luck. The rest are thrown away entirely. They do not form part of the final hash or anything else, the energy spent on them is lost.
"Safe assets are much riskier than risky ones. This is I think the deep lesson of the 2008 financial crisis, and crypto loves re-learning the lessons of traditional finance. Systemic risks live in safe assets. Equity-like assets — tech stocks, Luna, Bitcoin — are risky, and everyone knows they’re risky, and everyone accepts the risk. If your stocks or Bitcoin go down by 20% you are sad, but you are not that surprised. And so most people arrange their lives in such a way that, if their stocks or Bitcoin go down by 20%, they are not ruined.
"On the other hand safe assets — AAA mortgage securities, bank deposits, stablecoins — are not supposed to be risky, and people rely on them being worth what they say they’re worth, and when people lose even a little bit of confidence in them they crack completely. Bitcoin is valuable at $50,000 and somewhat less valuable at $40,000. A stablecoin is valuable at $1.00 and worthless at $0.98. If it hits $0.98 it might as well go to zero. And now it might!
"I have in the past told the story of TerraUSD and Luna by saying: The weakness in TerraUSD is Luna. One UST can be exchanged for $1 of Luna, but that only works if people continue to have confidence in Luna; if Luna goes to zero then TerraUSD will follow. But you could also tell the story by saying: The weakness in Luna is TerraUSD. Luna, as the cryptocurrency of a blockchain ecosystem, would rise or fall with the value of that ecosystem. But Luna, as the thing supporting a stablecoin, could go to zero in a week if that stablecoin needed support. Terra was so unstable because it was trying to be stable."
Their interview question was: design a simple app which allows one to query the effect of crypto price changes on the supply & price of LUNA. I gathered that the upshot was, how big a movement would be required to break the $1 peg? I wonder if their models weren't good, or if their models were good, and they were just accepting a high level of risk?
There are also rumors of a Terra fork: https://agora.terra.money/t/terra-ecosystem-revival-plan/870.... Thanks, but no thanks.
"Leading crypto exchange, Crypto.com, has announced that its users who traded embattled Terra’s native token, LUNA, on May 12 at around 12:40 – 13:39 (UTC) did so with the wrong price.
Crypto.com, one of such exchanges, has revealed that traders involved in the concerned transactions would have their transactions reversed, and a $10 reward in CRO, the native token of the platform, would be given to them as compensation for the inconvenience."
I think this Ponzi crypto assets are something like the evolution of fraud in a sense that scams are no more secretive, obscure and somewhat straightforward investment programs but more wrapped up in a sophisticated talk about cryptography, blockchain and DeFi which should bring you confidence that you should invest in them because they are more technologically advanced.
Somebody should write a book about Fraud in Crypto Assets from the more academic point of view and tbh I would very much like to read it. For example explaining the history of crypto fraud and scams, investigating them deeper and dissecting them from economical and financial point of view with the addition of explaining the basics of cryptography, blockchains and DeFi.
If there is no valid business model explaining where that 20% come from then it is just a Ponzi scheme.
In hindsight I’m glad I pulled out when I did.
Luna didn't collapse 99.999% in a matter of days because of a loss of faith in 99.999% of ITS value by speculators, but because of a ~50% loss of faith that triggered exponential inflation (printing of Luna tokens) based on the simple algorithm governing the ex-stablecoin. The fact that the supply of Luna started multiplying exponentially every minute that the stablecoin remained underpriced flooded the market with insane amounts of Luna. By virtue of the total amount of new Luna minted, its market cap is still around 300M (a "mere" 98.5% loss).
Bitcoin could go to near zero, but it would take DECADES and be a very drawn out process without SHA-256 breaking or every relevant country jointly criminalizing its existence. You could look at the values of any of the other deflationary early cryptos that clearly are now not going to play a pivotal role in the crypto landscape (e.g. LTC, BCH) and yet have essentially maintained their values and slightly grown with the market, slowly ceding market share to more relevant coins. In reality, coins like LTC and BCH should have lost 99% of their 2017 value, but because they are not inflationary like Luna, it hasn't happened and won't anytime soon.
Contrast this with a company that can clearly, unambiguously go bankrupt. These go to zero all the time when their value is essentially nothing by virtue of no longer doing business, they are legally disbanded, and removed from exchanges.
To oversimplify, it only matters if you care about crypto. And if you do, you already cared about this.
Why LUNA is now trading at $0.033 at Bitfinex - but $0.0004 at Kraken? I understand that it is probably impossible to arbitrage it now - but two orders of magnitude? Come on!
Why UST is still trading at $0.16 - even without arbitrage mechanism to stabilize it? Some people still have hopes. This might go on for some more time.
The revival plan is to emit a new token and give away some of it to UST holders (https://agora.terra.money/t/terra-ecosystem-revival-plan/870...) - even if that new token gets the $1 value (which is probably not possible any more for algorithmic stable coins) - than still the 10% of $1B would mean $100M - that is 20 times less than the current market cap - so the UST price should be about $0.008 assuming that it all works. It is impossible to short it at Bitfinex right now though.
There might still be some value of the Terra ecosystem - so many talented people working on it, even a bankrupt startup can get some price via acquihire - but the Terra ecosystem was a ponzi schema maybe its value should be negative? https://twitter.com/zby/status/1525407557371691008
I saw green today just like on the stock market... and red yesterday just like on the stock market
In service of efficiency and maximizing profits: claims on cash with claims on digital tokens. I will leave out the massive inflationary use of cryptocurrencies themselves like CEXs issuing their own tokens as a bonus sideline. At this point one could easily argue that the market cap lists are advertisement panels controlled by CEXs disguised as score boards (filled with "sponsors".)
As we know from the practices of centuries old fractional reserving (how much does a bank has to hold on reverseves to create some amount money (credit) out of thin air?) "traditional" stablecoins are most certainly backed by (intransparent) fractional reserves, the most infamous one being Tether. For all we know they could be running at whatever is needed (some percent) to keep the machine barely running by people cashing out.
Sooner or later triggering events will briefly pause the music on those merry trips to Jerusalem - but on this scale of course not equally for all so that those at the centralized sources themselves have enough time and the insight to react accordingly by taking everything they can and run; which again leaves the rest with basically nothing.
So, in short exactly the opposite of what were/are the stated goal of cryptocurrencies. From that perspective I am eagerly awaiting the next iterations of CEXs and at some point after a lot of financial casualties the growing awareness of their abusive ecosystem of playing into the addictive and destructive nature of gambling fueled by the financial insecurities and disillusionment of social mobility a lot of people are facing in the real world. But I guess, this will be a long fight.
Somebody here posted this: https://www.bloomberg.com/opinion/articles/2022-05-11/terra-...
It's a pretty decent explanation.
The only stablecoins I see actively used in the real world are Tether and Binance.
My point is, nothing changed and nothing of value was lost for a big part of the crypto community.
Not sure how many more examples are needed before people realize the rules need to be a bit more flexible to accommodate human mistakes.
Those products are meant to cause financial losses on first bug which obviously doesn't work.
Someone with $2B did the math using the new higher rate of inflation and pulled out of an asset that doesn’t produce anything because it has simply become less attractive. This pattern will keep repeating until inflation drops.
If you're licking your wounds, remember that things come and go. I know that's a shitty thing to deal with (I've lost my ass is crypto before too so I know first hand), but don't do something to yourself that is permanent and can never come back from. It's absolutely NOT worth it.
If you dodged this one, now is the time to be full of compassion to your fellow humans, not dancing on graves and gloating in "I told you so."
Eine Dose Mitleid!
A currency only persists so long as people believe in it. That's it. As soon as that belief goes, it's all over. Even if it's collaterized that's true.
What actually maintains the value of the US dollar is the long dick of the US government through the Fed obviously but also foreign and domestic policy. It's the ability to project military power anywhere on the planet. It's the nuclear arsenal.
So it obviously sucks that people lost sometimes a lot of money on Luna (seriously the subreddit is a dark place now) and I believe at least some of the anecodtes of people losing their houses.. This probably shares a lot of pathology with gambling addiction (fun fact: gambling addiction has the highest rate of suicide of any addiction).
But you also need to recognize that a lot of people who got wiped out by Luna were in it to get rich quick. I mean even the ~20% staking returns on Anchor should be alarming by itself. Who is paying for that 20% return? It's bound to be a Ponzi scheme.
Can't make this shit up