From Terra Crashed To FTX Broke

in blurt-network •  last year 
The crypto market is again facing a tough ordeal where the crisis again befalls crypto companies, this time the second largest crypto exchange, namely FTX.

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The true crypto crisis has occurred since last May, where the beginning was the fall of coins (tokens) made by Terraform Labs, LUNA and TerraUSD.

However, before the fall of the two Terra tokens, the crypto market had formed a bearish trend since the beginning of this year, where the formation of this trend was due to psychological investors who were worried about global conditions, even though the recovery started at the beginning of this year.

Central bank policies, especially in the United States (US), which no longer apply the easy money policy have made crypto investors start to be selective in investing in risky assets.

In addition, investors' concerns have increased after the start of the war between Russia and Ukraine. So that investors are more selective and careful in investing in the crypto market.

The impact is starting to withdraw investor funds ahead of May 2022 and causing the Duo Terra token to be unable to survive amid heavy withdrawals or can be called a bankrun.

The altcoin version of the Terra token, namely LUNA, is a crypto asset of a blockchain-based project developed by Terraform Labs in South Korea.

Terra has ambitions as a platform to create stablecoins tied to official money issued by central banks. The goal is to support global payment systems with fast and affordable settlements such as for example Alipay on the blockchain. Developers offer a target of one coin worth US$ 1.

LUNA has a vital role to play in stabilizing the prices of stablecoins in the Terra ecosystem and reducing market volatility. When UST drops slightly, LUNA will be sold or burned to stabilize prices.

UST is an algorithmic stablecoin. Instead of having cash and other real assets held in reserve to back up the token, the project uses a mix of complex code and LUNA to stabilize prices.

Before there was a massive withdrawal, the two tokens had shown their existence by touching record highs (all time highs). For LUNA (now LUNC), the ATH is in the range of US$ 116.42 per coin which was formed on April 5.

But on May 13, the price suddenly dropped to touch the range of US$ 0.006 per chip, far from a penny.

The downfall of LUNC is not without cause. This is because UST (now USTC) was unable to maintain its base at US$ 1. On May 10, USTC's fall began and its peak occurred on June 26, where the price touched the range of US$ 0.008 per chip, far from US$ 1.

When USTC was unable to carry out its main function, its sister coin, namely LUNA, had to be burned, so that USTC was able to return to its peg at US$ 1. However, this ultimately failed to save USTC and both of them even collapsed.

Terra has done various ways to save both of them, where one of them creates a new token, where the old token is labeled classic, so the code changes.

However, this step did not make investors trust LUNA, UST, or Terra again. Investor confidence has also faded.

After about a month due to Terra's fall, many crypto companies began to be affected by the fall, where most of them experienced a liquidity crisis due to many not fulfilling their obligations. Moreover, many crypto companies have exposure to Terra, so this can affect the financial performance of crypto companies. The first 'patient' of Terra's victims was Celsius Networks, a crypto lending company from the United States (US).

On June 13, Celsius announced that it was suspending all withdrawals on its lending platform, citing extreme market conditions and the need to stabilize liquidity.

Hours after the announcement, native token Celsius (CEL) plunged 70% in one hour of trading.

Exactly one month later, namely on July 13, 2022, Celsius Network filed for bankruptcy or bankruptcy under Chapter 11 with the court in the Southern District of New York.

Celsius stated that this decision was in the interest of the community which is his priority and will work with various parties to fulfill their obligations to customers.

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Celsius was under intense pressure after the US central bank (Federal Reserve/The Fed) aggressively raised interest rates which made risk sentiment negative. Besides that, Celsius' crisis was also caused due to the effects of Terra fall.

Despite being the first victim of Terra's fall, Celsius became the umpteenth company to file for Chapter 11 bankruptcy. The first company to file for Chapter 11 bankruptcy was Three Arrows Capital (3AC).

3AC is a Singapore-headquartered crypto hedge fund company. 3AC was founded in 2012 by Su Zhu and Kyle Davies.

The company also offers investments such as equity, platform funds, decentralized finance (DeFi), base layer, and others.

The company has demonstrated outstanding growth since its inception with ambitious long term plans to grow alpha in the company's core competencies. In its last public statement, 3AC's net asset value reached US$ 18 billion.

However, the downfall of Terra and the crypto crisis forced 3AC to end quickly. 3AC began to experience funding problems, where it was unable to fulfill its obligations, namely paying debts to its creditors.

In fact, 3AC was declared default or failed to pay by its creditor, Voyager Digital, which has also been declared bankrupt.

Three Arrows Capital failed to fulfill its loan obligations of more than US$ 670 million or around IDR 9.93 trillion (assuming an exchange rate of IDR 14,825/US$) to Voyager.

The obligation is US$ 350 million (IDR 5.19 trillion) in the form of stablecoin USD Coin (USDC) and as many as 15,250 Bitcoins pegged in US dollars with a value of around US$ 323 million (IDR 4.79 trillion).

Because 3AC was unable to fulfill its obligations to Voyager, in the end Voyager became the first crypto company to file for Chapter 11 bankruptcy in New York, USA, on July 6, or a week before Celsius filed the same thing.

About 4 months later, the FTX crypto exchange had a turn to become a victim of the crypto crisis and of course Terra's downfall, even though Terra's crisis had an indirect impact.

On November 12, FTX filed for Chapter 11 bankruptcy, after the company and its affiliates struggled to meet their obligations.

In the 23 pages of bankruptcy filings obtained by CNBC International, FTX shows that it has more than 100 thousand creditors, assets in the range of US$ 10 billion - 50 billion, and liabilities in the range of US$ 10 billion - 50 billion.

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The FTX crisis was also not without cause, the fall of the native FTX token, namely FTX Token (FTT) was one of the triggers, where the fall of FTT was also caused by a massive withdrawal or bankrut. In fact, the FTX crisis is like 3AC and Celsius, where FTX affiliated companies are starting to be affected. The companies are BlockFi, Genesis, and Gemini.

Many people in the past year believed that crypto would be the investment asset of the future and many are hunting for it. But now it's the opposite, where many people are starting to distrust the security of crypto and its future prospects.

Many 'anti' crypto adherents predict that the future of crypto will be bleak. Moreover, with the potential for a global recession that will occur next year, this strengthens the belief that crypto cannot be saved.

One of them is Schiff, CEO of Euro Pacific Capital, who says crypto will become extinct. In fact, now crypto is no longer facing crypto winter or crypto winter.

"This is not crypto winter, nor is it an ice age. This is crypto extinction," Schiff said in his tweet on Twitter, as quoted by Yahoo Finance. However, for crypto supporters, the current crisis is only temporary and will rise again in the future.

One of the supporters of crypto is Robert Kiyosaki, author of the book "Rich Dad, Poor Dad". Although he is one of the supporters of crypto, he also predicts that Bitcoin can break the psychological level of US $ 10,000. However, it is not known when Bitcoin can touch that level.

In his tweet on Twitter, Kiyosaki admitted that he was not expecting a reversal of Bitcoin's direction based on market capitalization because he is a long-term Bitcoin investor rather than a trader.

Kiyosaki is optimistic that a new low will come for Bitcoin and could reach US$ 10,000. He said if it happened, he would be excited about it rather than nervous. Previously, Kiyosaki said he was bullish on Bitcoin because state-sponsored pension funds started investing in Bitcoin.

"Why buy gold, silver, Bitcoin? Pivot Bank of England means buying more GSBC. When pension funds were about to collapse Central Banks couldn't fix them...INFLATION. Pensions have always invested in G&S (gold and silver). Pension funds are now investing in Bitcoin. They know Fake$, stocks & bonds are toast," he said in a tweet.

During an interview in May, Kiyosaki said that rising inflation, shortages of social security and healthcare funding were the main factors affecting the economy. Despite the differences of opinion regarding the extinction of crypto, from a transactional perspective, the crypto market is still doing quite well at this time.

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As of Saturday, data from retail investor flow tracker Vanda Research showed that inflows to crypto-related stocks and ETFs in the five days following the FTX collapse totaled US$27 million, or a daily average of US$5.4 million. This figure is down from this year's daily average of US$ 14.4 million.

Even more remarkably, since Bitcoin has plunged 75% from its all-time high in November last year, Vanda said retail investors poured US$3.7 billion into crypto-related assets and funds.

Many say cryptocurrency is the future of money, empowering individuals, offering financial freedom and liberation from the control of governments and central banks. State-of-the-art technology also enables fast and secure payments.

The post-pandemic rising bubble, however, is the result of something else: the classic speculative madness, the 'FOMO' (fear of missing out) that develops itself when prices soar.

Millions of people are pouring billions of dollars into a market that has long been criticized for FOMO, lack of oversight, and highly speculative nature in hopes of getting rich quick.

But recently the crypto market has been shaken. Anthony Scaramucci, founder of Skybridge Capital, the company in which FTX recently bought a 30% stake, says the industry will survive and thrive, but last week was probably the toughest of his career.

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So it seems that even though there is an inflow of funds, they are still unable to fight the pessimism of investors who eventually run away with funds from crypto. Especially in the midst of an unstable global economic situation. Then what about crypto in the future? Will it really become a future asset or will it become extinct? We'll see later.

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