If you invested in the Terra (LUNA) ecosystem, my condolences. Whatever happened was just unfortunate and could have been prevented if Do Kwon didn’t simply shunt his critics and actually took the feedback to improve the protocol.
Nonetheless, that’s not what I intend to talk about today. Albeit a significant reason behind the crash of epic proportions, there are multiple other reasons why crypto markets have tumbled.
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The OG BTC is more than 50% down from its ATH as I write this one. Know more about Bitcoin, the top cryptocurrency here. Some altcoins are beaten blue even further to witness a downfall of up to 70%.
In a nutshell, it’s not May; it’s Mayhem. But what led to where we are today? Is it the fault of our stars? Or is something else at play? So let’s find out the top reasons behind our portfolio carnage.
First of all, the crash is not specific to the crypto-verse. Suppose you are an avid investor, congratulations. You are being screwed left right, and center. What I am trying to say is that even S&P 500 is also down by 15% from its 52w high. Back home, Nifty is slightly better off with a 12.5% correction.
If your regulated, relatively stable cousins are coming down like there is no tomorrow, I won’t be surprised to see the notorious, volatile crypto chaps going berserk.
The Fed FUD
Feds have called for interest hikes to control the record-high inflation in the US. We came down to this because excess money was printed in Covid to kickstart the economy. How much, you ask? Well, 40% of the total USD supply was printed in the last two years alone!
Interest hikes need to be taken to wipe such enormous amounts of cash. With interest hikes, the federal bank is essentially trying to safeguard the value of the dollar.
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If you haven’t guessed by now, this is detrimental to the cause of BTC. Bitcoin at its ethos is a deflationary asset and as global currencies lose their value, it automatically accrues some.
Covid? Not again:
China’s no-tolerance policy towards Covid has again led to supply chain disruptions leading to the economic slowdown. There are also fears looming around another wave that would further impact an already fragile economy.
The War and Other BS
Well, we come together to vaccinate each other at a record pace just to find ways to kill each other using missiles and weapons. Crazy right? The war between Russia and Ukraine has damaged the prospects of a quick recovery from Covid. There is just too much uncertainty creating a selling pressure, forcing people to sit on cash instead.
On the other side, the Sri Lankan economy has gone to tatters. This has yet again created disturbance worldwide. Coupling it with Rupee falling to a record low against the dollar has also caused a ruckus.
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The $LUNA Debacle
Here we go again. Another algorithmic stablecoin is biting the dust. However, this time around, the wealth that was wiped off from the market was something never seen before. LUNA and UST combined lost $50bn of investor’s money.
To make the matters worse, LFG or Luna Foundation Guard had stored close to $3 billion worth of BTC to defend UST’s peg. When things got out of hand, they had to sell it at a loss. This, in turn, drove the price of the industry’s largest asset further down, still not helping their own cause. LUNA’s fall is one of the most epic falls in the crypto space.
If you’d ask a technical analyst, they would have varied opinions. However, the common theme across all of them is that this is not the bottom. Even the famous Robert Kiyosaki, the author of Rich Dad, Poor Dad, thinks that BTC will come down to $18K. That’s when he would start accumulating.
Well, nobody can predict this with a 100% possibility. Nonetheless, for now, take a break from your portfolio, go outside, and take a walk. Don’t do anything stupid, and HODL. Billionaires are made in bear markets!