Friday, May 13, 2022

🤨 🐢

Oh....

Ethereum has now lost more than half of its value this year, Bitcoin has shed a third of its value since January and Luna with 98 per cent of its value wiped out overnight with suicide hotlines pinned to the currency's Reddit page as a result.

CNBC:

Luna, the sister cryptocurrency of controversial stablecoin TerraUSD, has collapsed to nearly $0.

TerraUSD, or UST, has been dragged into the spotlight in the last few days after the so-called stablecoin, which is supposed to be pegged one-to-one with the U.S. dollar, fell sharply below the $1 mark.

UST is an algorithmic stablecoin which uses code to maintain its price at around $1 based on a complex system of minting and burning. A UST token is created by destroying some of the related cryptocurrency luna to maintain the dollar peg.

Unlike rival stablecoins Tether and USD Coin, UST is not backed by any real-world assets such as bonds. Instead, the Luna Foundation Guard, a nonprofit created by Terra’s founder Do Kwon, is holding about $3.5 billion of bitcoin in reserve. 

Its peg has been lost and now investors are rushing to dump the associated luna token. Luna’s price has plunged from around $85 a week ago to trade at around 3 cents on Thursday, according to data from CoinGecko, making the cryptocurrency almost worthless.

And back to the Daily Mail:

Popular cryptocurrency Luna lost its pegging to the dollar this week, falling below $1 per coin, causing prices to drop dramatically as the industry panicked (similar to a run on a bank).

The coin, also called Terra, lost 98 per cent of its value overnight. 

'The Terra incident is causing an industry-based panic, as Terra is the world's third-biggest stable coin,' said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank. 

But TerraUSD 'couldn't hold its promise to maintain a stable value in terms of U.S. dollars.' 

And the Guardian darkly hints the problem may not be limited to inflation fears and commercial paper holdings:

But technology never replaces social and political behaviour; it merely alters the rules and norms we follow. To see this in action, one need only look at the plummeting value of Terra Luna, a crypto token that crashed by 98% in a day, causing some investors to lose their life savings; the plunging value of Bitcoin and Ethereum; or the countless scam victims whose non-fungible tokens (NFTs) have been stolen. NFTs use the same blockchain technology as cryptocurrencies, such as Bitcoin, to trade algorithmically generated illustrations that riff on a theme. On offer are cartoony Bored Apes, Lazy Lions and “CryptoDickButts”. Although NFTs are aesthetically uninspiring, they can sell for as much as $91.8m – and as they have grown in value, scams involving stolen NFTs have abounded. Just last month the Bored Ape Yacht Club’s Instagram account was hacked, and the perpetrators stole about $3m worth of NFTs by directing followers to a fraudulent site.

When a scammer steals a CryptoDickButt, all the ecstatic manifestos about the decentralised power of the blockchain disappear, as scam victims plead with the handful of crypto exchanges to block the sale of their stolen NFT. The underlying technology and its tokens might be decentralised (and even that claim is questionable, given that cryptomarkets are wildly concentrated in the hands of a few hundred people), but where you can actually buy, use and sell these things is still limited to a few services and exchanges. This forces crypto fans to recognise a hard truth: currencies and contracts are only as valuable or enforceable as the people and institutions that recognise their legitimacy. Blockchain technology does not change this fact whatsoever. 

So investors in crypto not only have to worry about normal economic conditions; they have to worry about who's minding the store, too.  The article goes on to point out the massive consumption of electricty involved in "blockchain technology" and "currency mining," a consumption which led China to ban the technology altogether.

This is only the beginning. Churning out inscrutable financial assets using coal-powered electrical grids is contributing to a rapidly warming planet that is already experiencing the worst droughts seen in more than 1,000 years in California and supercharged monsoon seasons in India. All the ethereal imagery associated with crypto obscures the fact that it is made up of millions of tons of coal, copper, rare earth metals and plastic. The servers that mine crypto exist on the planet in real countries with laws, wars and resource shortages – which are governed by politicians that have real commitments and interests. With the Russian invasion of Ukraine, we are beginning to see an emerging geopolitics of crypto that looks very much like the old world of banking and finance.

I was getting hints of this on Twitter, and truly had no idea what was going on in crypto (nor did I really care).   

And this is a handy explainer: It seems it's turtles all the way down.

Meanwhile, in related news, "just desserts" rises as an explanation of "cosmic justice":
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