The cryptocurrency market is crashing right now, with the bitcoin price under $30,000. I want to explain exactly why this is happening. What this means if you’re a crypto investor and just to be real with you. Nowadays, it’s hard to make a decision and to enter any new project. It’s even more complicated when you try to save your old ones, but what can help you to feel more confident in your thoughts is a Jet-Bot copy trading platform. Copy best traders automatically to earn up to 2000% APY on Jet-Bot copy trading platform. People should rest, robots should earn money.
Terra Luna Collapse EXPLAINED (Why Bitcoin is Crashing)
As we’ve been covering for almost a week now, this collapse of Terra Luna and their algorithmic stablecoin is what’s driving all this uncertainty in the market. Terra’s USD (UST) algorithm stablecoin is sitting at $0.64 on the dollar. It’s supposed to be stable. It’s supposed to be pegged to a dollar, and here’s the issue.
Just as a little recap, here’s why it’s tanking: UST is backed by a reserve of bitcoin, which is going down, and Terra Luna, which is collapsing at the moment as well. If your stable coin is going down and the reserves that back your stable coin are also going down, you’re going to have to sell those reserves to prop up your stable coin to keep the peg.
The fear is that it creates sort of a spiral of BTC being sold, LUNA being sold, and if you still can’t keep the peg, it sort of just adds on to this death spiral. That’s why crypto is crashing, and if that still sounds a little confusing. Let’s dig a little deeper.
As of this morning Terra’s LUNA drops to almost $1 after 90% weekly plunge. Selling pressure on LUNA came as its parent foundation issued 46 million tokens in the past day to maintain UST’s 1:1 peg with the U.S. dollar. So Terra Luna and LFG is actively selling bitcoin as well as Luna to try and regain that peg to their stable coin. That’s public knowledge. Do Kwan made that very clear a few days ago. And like we covered when this news came out:
Every time UST falls below their peg, they sell BTC and sell LUNA to buy USD to help maintain that peg. And then they’ll also subsequently buy Bitcoin and buy the LUNA back if the price goes above the peg, which has sort of been a non-issue for the last almost week.
Terra Founder (Do Kwon) EXPOSED!
Next up for breaking news as of this morning, UST’s Do Kwon was behind an earlier failed stablecoin basis cash, which I guess was the name of an algorithmic stablecoin project founded by an anonymous ‘Rick’ and ‘Morty’ in 2020, which was actually the work of Do Kwon as well as other Terraform Labs employees. We only know this because an ex-terror colleague stated this information made it public and then other ex-Terra colleagues confirmed this information on Do Kwon.
Basis Cash (BAC) was a closely watched revival in decentralized finance circles when it launched on Ethereum in late 2020. It sought to maintain a $1 peg through code, not collateral. It was an algorithmically stable coin. But it failed. The token of this long abandoned project never achieved its target of dollar parity. It sank below a dollar in early 2021 and was currently trading well below a cent on Wednesday. Now history appears to be repeating itself.
UST sank precipitously below its mean, falling as low as 27 cents in the early morning hours of Wednesday in the United States. Are we just learning this information on Do Kwon today? Well, Hyungsuk Kang, a former engineer at Terraform Labs, said Basis Cash was in fact a side project of some of Terra’s early creators, including himself and Do Kwon. In a direct quote from this engineer, ‘Basis Cash wasn’t tested at the moment, and we weren’t even sure it would work.’ Kang said. Kwon ‘wanted to just test it out. He said that this was a pilot project for doing that.’ So yes, you could call it a pilot project, but this was a project that traded on the open market. People who invested or tried to not even invest just store their money in stablecoin basis because the stablecoin was under one cent at the moment.
NEW: Do Kwon Issues Statement About UST Stablecoin
Anyway, that was in the past, just wanted to make you aware of what’s happening today with Do Kwon’s current stablecoin. Well, Terra’s founder Do Kwon has shared plans again to save the UST stable Kwon peg. Here is Do Kwon’s tweet thread from early this morning addressing the situation:
This next thing may sound a little complicated, but stay with me:
The cost of buying back so much of the stablecoin is severely diminishing Terra Luna at the moment.
They’re trying to buy back the supply and regain the peg. Do Kwon finishes by stating this:
Rallying the troops as a good leader should. We will see.
My Thoughts on This Collapse
My take on this is whether or not their algorithmic stable coin makes it to Terra Luna. The ecosystem in general will make it if the developers stay and if the building keeps happening. When in doubt, zoom out and understand that we’re witnessing innovation work itself out in real time globally, and with massive innovation comes massive experimentation, which is equal parts risk and opportunity. Now think about this from some very interesting perspectives:
Another Publicly Traded Company Buys Bitcoin
Next up, we do have some good news right now. It is not all bearish if you think long term. For example, a major New York digital media company has just added bitcoin to its balance sheet. Actually, they added this bitcoin back in Q1 of 2022. We are just getting the disclosure to the SEC today. Town Square Media, a New York-based digital marketing and radio station company, is the latest business to back the original cryptocurrency with its addition of $5 million worth of bitcoin to its balance sheet. This is the direct tweet where we learned this information:
They also said the company may increase or decrease its holdings of digital assets at any time based on our view of market conditions. They’re saying that if it dips, they could buy more to accumulate the dip, or if bitcoin goes up, they do reserve the right to sell and take profits, but another publicly traded company has bought bitcoin anyway.
[This article is a transcription of a video made by Altcoin Daily]
Original video: https://youtu.be/wrKiBuBeWfM ]