The run on the bank is burned to Collective American imagination There is a good reason. When the Great Depression struck Millions of Americans It was wiped out when their bank collapsed.Therefore, the Federal Deposit Insurance Corporation (FDIC) Introduced Since then, the FDIC-guaranteed penny of funds has not been lost in the event of a bank failure.
If your “bank” is a crypto company, that’s another story. As crypto prices collapse, customer deposits are disappearing with them or being swiped by the people behind the company. The unregulated market looks much like the 1920s.
Bitcoin Proponents have made a major switch from claiming that cryptocurrencies can function as real currencies, mostly because they still exist. Mainly infeasible To pay for something in it. The current claim is that Bitcoin is “Valuable store— That is, an asset that does not lose its value over time. This has been shown to be dramatically untrue. More than that, shopkeepers were collecting valuables in their (US dollar-denominated) safes.
May, Terraform Labs terraUSD (UST) Stablecoin (a token fixed to the value of the US dollar, but with little legal oversight, allowing for faster trading)Collapsed And the price of Bitcoin crashed in order. Things seemed to be stable for a few more weeks, but on the surface, the crypto market was at stake.
June 12, Celsius, a crypto investment company Stopped all withdrawals, Insist on “extreme market conditions”. The market has panicked. Bitcoin prices plummeted from $ 28,000 to $ 20,000. By June 14, Celsius said, “restructuring.. Within a week, Bitcoin crashed again.
Celsius can replace a bank account, Claim one million customers.. The company offered stunning interest rates — 18 percent per year. But the interest rate in Celsius was frankly unbelievable. Nowhere in the current economy can you profit more than a few percent. If someone offers 18%, the first thing to think about is “what’s wrong here?”
Celsius had already been thrown out Alabama, Texas, KentuckyWhen New jersey This is because the interest-bearing account was functionally an offer for unregistered securities.The US Securities and Exchange Commission was investigating Celsius After January 2022— But I haven’t acted on it yet.
Another problem was that Celsius was intertwined with many other crypto companies. This includes lenders that offer incredible interest rates as well. This was not a rogue operator. This is part of systemic risk and is comparable to Lehman Brothers during the 2008 financial crisis.
Behind all this was a toxic waste disposal site for unregulated, suspicious sources of investment. Bitcoin prices began to rise in 2020, New asset bubble in early 2021, Peaked at $ 64,000 in April 2021 and peaked again at $ 69,000 in November 2021. Both price pumps occurred at the same time as the injection of billions of tethers. Suspicious dollar-equivalent stablecoin, Via an unregulated offshore exchange. When Elon Musk started talking about cryptocurrencies in January 2021 and bought Bitcoin for Tesla in February, real interest and real dollars came from ordinary investors. Many of those investors withdrew from the market when Tesla was reported to have sold Bitcoin in May. (Later mask Claim Without the actual dollar, the price of Bitcoin plummeted to $ 31,000 by June 2021.
News headlines about cryptocurrencies are touting billions of high valuations. However, these numbers are subtly calculated virtual amounts, not actual amounts that can be used or cashed. Cryptographic trading is zero sum: for every $ 1 a winner earns, the loser loses. The slow inflow of the actual dollar creates problems in the crypto market.
There wasn’t enough foreign currency to pay the crypto holder’s paper wealth. The industry needed to come up with more elaborate plans to attract fresh foreign currency.Venture capitalist was desperately promoted NFT And Web3 — although it wasn’t clear what “Web3” meant. Cryptocurrency companies advertised during the February Super Bowl, marking the time when the industry reached almost all American consumers, leaving no new customers.
It’s good if your customers need your product on a regular basis and you make money with it like light bulbs, insurance and toilet paper. But it’s a sign of the end of a startup that has lost a lot of money that has reached the Super Bowl level, and is even more deadly for investment schemes that rely on attracting new customers to pay for old ones. Charles Ponzi Discovered in 1920.
Until 2021, crypto lenders broke into the bubble and offered incredible interest rates. Celsius and the crypto hedge fund Three Arrows Capital (3AC) dominated each other and in Terraform’s anchor protocol. Celsius repeatedly reassumed the loan, using the borrowed assets as collateral for another loan. This allows for greater leverage to get better returns at the right time.
Cryptographic investment firms have played the DeFi protocol, the hottest market for crypto. DeFi stands for “Distributed Finance” and is a method of automatically exchanging almost all cryptocurrencies for other cryptocurrencies. You can deposit assets and borrow against them. You can build complex leverage chains. You can even reassume your loan without humans stopping you.
You can also create assets from thin air, make several transactions, and assign price tags in dollars based on those transactions. However, the token price is actually another token, priced at the third token. Priced in dollars. This allows you to claim millions or billions of “market capitalizations”. Terraform’s UST token and its twin token luna were created and evaluated this way. UST was advertised as “Stablecoin” and was definitely worth $ 1 and supported by Luna. However, UST and Luna were only supported by wishful thinking and anchors, another means of investment that provides 20% interest on UST deposits. UST, Luna, Anchor Collapse in May.. The $ 18 billion UST has gone to zero. Bitcoin crashed from $ 36,000 to $ 26,000.
Ordinary moms and pop investors were severely burned in the May crash. The inflow of retail dollars was almost completely blocked. Cryptographic exchanges such as Coinbase, Gemini, and Crypto.com are where external dollars come and go. All three Announced a large-scale layoff..when 60 Minutes Australia Reporter Tom Steinfort, who ran the segment in the slump in cryptocurrencies Confession That he himself invested in the rise of cryptocurrencies with hints from friends.
UST / luna was a cryptocurrency Bear Stearns for a moment. Large lenders reassured customers that everything was fine and, if any, they were not exposed to UST or Luna, but withdrawal was often difficult. Observers pay attention to the lender’s DeFi transactions displayed on the public blockchain, detail Often the numbers claimed by the company did not match the evidence.
Finally, Celsius closed the customer withdrawal on Monday, June 13. 3AC I started Dump your belongings on Tuesday Wednesday It means that we are in the process of communicating with the people involved. Finblox offered up to 90% annual interest and reduced withdrawals to $ 1,500 per month. Thursday.. Babel Finance FridayQuoted “abnormal liquidity pressure”.
Bitcoin’s price dropped to $ 20,000 on June 13, slightly above that price throughout the week. This level was not just psychological. There were multiple DeFi loans that would have been automatically marginally charged and liquidated if the price fell below that number. This meant that the holders of those loans had to keep prices a little higher. Other cryptocurrencies such as ether were equally important price levels.
I’ve finally run out of money to raise the price. Bitcoin fell from $ 20,300 to $ 19,100 in five minutes as multiple loans were automatically liquidated at the same time at 6:51 AM UTC on June 18. It bottomed out at $ 17,600 later that day. Similar to the 2008 financial crisis, the crypto economy was destroyed by unrestrained, over-leveraged financial engineering and deliberately hidden risks. But this time, there was no Federal Reserve to bail out businesses.
So who saves the cipher? Since 2017, Tether has regularly bailed out the crypto market. One study The infusion of tether showed that it supported most of the 2017 bubble, including when tether went bankrupt.However, Tether Holdings was fined New York And that Commodity Futures Trading Commission (CFTC) In 2021, the alleged supporting reserves were repeatedly misrepresented and placed in a strict reporting system.Tether Holdings unleashes reserve positions, cuts issuance by 15 billion tethers, last week Clearly denied being exposed To a recently failed company — the company Investor In Celsius.
It is difficult to regulate the cryptocurrency trading market. The US-regulated cryptocurrency exchange is just a cashier’s desk for precious dollars. The majority of transactions and price discovery take place on totally unregulated offshore exchanges that seemingly avoid US customers. These exchanges enable and carry out the abuse of all markets and clients that caused the stock market to be regulated in 1933.
Cryptographic exchanges are notorious for abusing customers, but they can escape, and the offshore market makes it much easier. Still, even Coinbase, a US exchange operating under New York regulations, operated a market that was largely counterfeited with the cryptocurrency Litecoin from 2015 to 2018. 99% of transactions One day, there was one clothes transaction by a Coinbase employee. In other words, I was buying and selling from myself.Exchange is $ 6.5 million fine According to CFTC.
But Celsius was a clear failure of existing regulations at the expense of ordinary investors. The company has been operating in US jurisdictions for three years, offering incredible interest rates without properly explaining where the money came from or the investment from retail customers. Celsius and similar companies that pitched to US investors should have been closed at least a year ago.
After the party is over and the horses are bolted in, regulators can safely move and close stable doors. If not, another bubble may reoccur in a few years. After the collapse of the Bitcoin bubble in 2017, regulators were unable to curb cryptocurrencies. Don’t miss your chance this time.
