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Blessed is he who expects nothing, for he shall never be disappointed. -- Alexander Pope

An epic crash in algorithmic stablecoins spells trouble for the entire
industry.

At a Mexican restaurant in North London a few weeks ago, a handful of
small-time but remarkably discerning retail cryptocurrency investors
predicted that terra and luna would crash. Several of them were scoffing
at terra, or UST, a stablecoin whose price equivalence to the dollar is
underpinned by algorithms and game theory rather than cash or collaterals,
and at the notion that it would maintain its peg in the long run.

https://www.wired.co.uk/article/terra-luna-collapse

The “Ponzinomics” of the project, they informed me, were just too risky.
Only one of the investors seemed optimistic, out of nihilism rather than
trust in terra’s solidity: He said that at some point UST’s price would
grow well above one dollar per unit, and the coin’s promoters would decide
to just keep it there and rebrand the stablecoin as an
“inflation-resistant cryptocurrency dollar.” Another shrugged but conceded
that all bets were off. “So far,” he said, “this story has always followed
the most humorous timeline.”

You can bet a lot of people do not feel like laughing today. UST has lost
its peg to the dollar (at the time of writing, you can buy it on
cryptocurrency exchanges for $0.58), and its sister asset luna has
plummeted from $82 last week to $0.02. A big chunk of the investment of
around $60 billion in these cryptocurrencies was pulverized overnight, and
more of it will follow as people scramble to get rid of their diminished
coins.

Meanwhile this week, the wider crypto market is in turmoil as bitcoin fell
to $27,000 after bleeding 8 percent of its value in 24 hours, and many
other cryptocurrencies are trailing its descent. Tether, the world’s
largest stablecoin, dropped under $1 on Thursday.

With terra, we are witnessing the crumbling of a project predicated on the
notion that you can create money—and assign it a specific value—if people
are willing to go along with the pretense that money has the value that
crypto companies assign it, akin to role-playing in a video game.

A small subsection of hardline crypto believers would retort that in the
age of post-gold-standard fiat money, most currencies are indeed just a
collective delusion. But the fact is that there is no government, central
bank, economy, or actual usage underpinning terra matters. As Frank Muci,
a policy fellow at the London School of Economics’ Growth Lab Research
Collaboration, puts it, “It is similar to a bank run, except it's a run on
nothing.”

UST was marketed to the public as a stablecoin, a type of cryptocurrency
whose value supposedly remains steady over time, creating a convenient
hedge against the wild price fluctuations of other cryptocurrencies like
bitcoin or ether. With most stablecoins, that stability is guaranteed by
currency reserves—whoever creates a stablecoin pegged against the dollar
should theoretically keep an equivalent amount of dollars in a vault
somewhere—or other collateral, including crypto. Except UST is an
“algorithmic stablecoin” and has none of that. It is fully shielded from
the real world, and takes pride in it.

On Terra’s own blockchain, UST has a symbiotic relationship with its
satellite asset luna, which can be used to earn cryptocurrency rewards. It
was always possible to exchange UST for luna and vice versa, and the
blockchain’s own code always made sure that terra traded at a dollar a
unit, while luna’s varying price was determined by algorithms keeping an
eye on the market.

That was supposed to keep its price stable by piggybacking on the work of
arbitragers, investors who attempt to profit from market inefficiencies.
If a sell-off of UST on cryptocurrency exchanges threatened to lower its
price below $1, the idea was that smart arbitragers would rush to buy UST,
and use them on its native blockchain to buy luna at a discount—propping
up UST’s price in the process.

If the opposite happened and UST’s price zoomed over $1 on crypto
marketplaces, people would use their lunas to buy one-dollar-a-unit USTs
on Terra’s blockchain and resell them on other platforms, bringing the
price of UST down. It is a clever architecture. It is also one that did
not and could not work. “It is a bit like perpetual motion machines.
People wanted to figure out how to get free energy. And these designs were
complicated—they would have pulleys, they would have magnets, they would
have levers,” Muci says. “With algorithmic stable coins, it's a little bit
the same idea.”

Ryan Clements, an assistant professor in business law and regulation at
the University of Calgary, made the issues with this approach clear last
year, in a paper devoted to algorithmic stablecoins titled “Built to
Fail.” One of the main problems with these stablecoins, Clements explained
in the paper, is that they can only work so long as there is demand for
them; otherwise all those incentives mean nothing. “UST was never stable
to begin with and was never fully collateralized,” Clements says.. “It
required a perpetual reliance on an assumption that there would be enough
(ongoing) interest in the various use cases of UST in the Terra ecosystem.”

Many crypto investors started finding their way to the door. Bobby Ong,
cofounder of cryptocurrency analytics platform CoinGecko, says that one
possible explanation for what happened to UST is “a George Soros-style”
attack, after the Hungarian philanthropist and financier’s famous bet
against the British pound in 1992. According to this theory, UST’s ruinous
fall—which started on Monday and spiraled into a catastrophe on
Wednesday—was precipitated by a large entity dumping billions of UST on
the market, shattering its peg. Another, simpler explanation is that UST
was just not sustainable, and this was always going to happen as soon as
the market's sentiment changed.

It is telling that some crypto personalities are laying the blame for the
supposed attack at the door of investment management company BlackRock and
hedge fund Citadel. Just over a year ago, Citadel had already been cast as
the villain in another story of financial craze, the so-called GameStop
saga—when millions of retail investors started buying the stock of the
ailing game store chain in droves, despite its dubious fundamentals, in an
odd act of defiance against traditional finance. Several observers back
then had saluted the rise of meme finance, where the value of assets was
no longer based on a business’s prospects and instead determined by
collective delusions, performative contrarianism, and sheer nihilism (“Is
[GameStop’s stock] worth 200+ dollars? That's for you to decide based on
your own value system,” one investor commented on Reddit, where the
rebellion first emerged.)

Terra’s rise and fall is, in a way, the endgame of that long stretch of
weird finance. It might not recover, and instead follow in the wake of
other Web3 downturns, such as bursting of the NFT bubble or the fall of a
great deal of meme stocks and dog coins.

But it would be disingenuous to read all this through the lens of
absurdism and pipe dreams. Terra’s explosion in popularity over the past
six months was also driven by mind-boggling incentive schemes. “The large
demand for UST was driven because of a savings protocol called Anchor on
Terra’s blockchain, which promised 20 percent in annual percentage yield,”
Ong says. People would buy UST and stash it in Anchor, a piece of software
where one could park one’s coins, hoping to see it grow like a magic money
tree over time. What’s more worrying, Ong says, is that Terra set an
example for many other crypto projects, which also started promising
absurd returns and now are at serious risk of crashing down.

The Ponzinomics were just too obvious: When you pay money for nothing, and
stash your nothing in a protocol with the expectation that it will give
you a 20 percent yield—all you end up with is 20 percent of nothing.

### - smile, jeremy once asked me what i thought of things like investing
in cryptos/bitcoin, and i replied that investing in 'imaginary' money
didn't sound like a particularly good idea to moi regardless of all the
hype to the contrary... and then (just to make me look foolish heh)
bitcoin went through the proverbial roof?

however, looking at it all again today in-light of the collapse of many of
them virtually overnight, and the reasons now given for being behind that
collapse, it would seem that my misgivings have been clearly borne out!

imaginary money is a good idea???

riiiiiiiight.... :))))))

(a modern con, perpetrated upon modern-believers, of modern-bs heh)

don't ever listen to it! just ruuuuuuun! haha :D

Subject	Author
Terra’s Crypto Meltdown Was Inevitable	slider
Re: Terra’s Crypto Meltdown Was Inevitable	SpiritK9
Re: Terra’s Crypto Meltdown Was Inevitable	chris rodgers
everybody must be get gouged	chris rodgers
Re: everybody must be get gouged	slider
Re:	slider
Re: Terra?s Crypto Meltdown Was Inevitable	o'Mahoney
Re: Terra?s Crypto Meltdown Was Inevitable	o'Mahoney

Blessed is he who expects nothing, for he shall never be disappointed. -- Alexander Pope

interests / alt.dreams.castaneda / Terra’s Crypto Meltdown Was Inevitable