This is a very thorough and well-researched article that explains currency pegs in general and the UST collapse in particular.<p>It's one thing to try an experiment and fail. It's quite another to mislead investors and not fulfill commitments. I imagine this paragraph will come back big time during the inevitable criminal and civil trials:<p>> It was here that LFG stepped in by allegedly selling their Luna and Bitcoin reserves to buy up UST in an attempt to stop the bleeding. However, as the price of Luna and UST fell, so did the price of Bitcoin as the LFG allegedly sold tens of thousands of their bitcoin. (Note: It is still unknown if they actually sold the bitcoin).
I know it comes up every time something like this happens, but who _are_ these retail investors who are left holding the bag? Individuals who thought it was a good idea? People who have money in a fund and this was part of their “crypto” diversification? I understand why the whales get in: they’re sophisticated enough and rich enough to multiply their money in an obvious Ponzi scheme, but why would anyone else get involved?
Seen a lot of retroactive victory laps but not a lot of articles on people that successfully shorted this algorithmic stablecoins tire fire.<p>Wondering when the crypto “Big Short” book will inevitably arrive.
“Strangely, some of these whales felt the need to share this in their comments following the crash.”
Why strangely? They’re advertising themselves as the smart guys who came out on top. In the world of crypto scammers, they are probably going to get a lot of congratulations and new investors.
Great piece wrt to the macro and monetary economics view. However, the “100k BTC short” story of the crash still seems unrealistic and over complicated, and is only sourced to a tweet thread of speculation at the time.
Just like in the fiat case, the attacker of a currency peg has enormous upside if the attack succeeds and essentially zero risk if it fails: the peg can only go down, not up. So shorters pile on to the diseased currency like lions biting a dying antelope, it's not a question of IF it will go down, it's a question of WHEN and what is the most profitable and likely to fail peg you can pit your capital against. These days, there's a whole herd of them.
What continues to surprise me about the shitcoin-skepticism (which verges on shrill around here) is not that people are skeptical, who wouldn’t be?<p>It’s that <i>there’s nothing new here</i>.<p>Maybe I’m just old, but I remember the late 90s and the 2001 wipeout. Companies were doing big IPOs with what we would now call a token white paper, selling garbage to retail investors that promptly went to zero. Under the shining flashlight of any and every Ayn Rand asshole who backed Greenspan in stomping on Brooksley Born over it.<p>But once the garbage collector ran and all the Luna, err, Pets.com garbage had been flushed out, there were a few real things. Google survived that, and in fact picked up all the leftover fiber and engineers and other infrastructure on the cheap.<p>It’ll be the same this time. Most of its garbage, but there will be one or two real things that will make it.
Author gives two examples of Russian Rouble losing its peg. But rouble was never pegged to any currency, it is free float since 1990, loosely guided by Central Bank interventions (see "currency corridor"). Only with the last Russian-Ukrainian war outbreak at Feb 24 2022 some non-market measures are in effect.<p>Source: I was living in USSR/Russia since my birth.
This is a really in depth and thorough article and I have a much better understanding of pegged currencies.<p>What I still don’t understand is how the uncollatorized algorithmic doodads were meant to work, and also how they weren’t collatorized? It sounded like there was a lot of asset purchasing to support prices?
"Brown shirts, hula hoops, mood rings, and new age,<p>The bait might change but the fish bite the same."<p>- Fish Karma<p>You can add crypto to that list right after Beanie Babies.
The Luna event has changed my view on cypto too. I don't believe ANY crypto, including BTC, is worth more than $1. I've owned ADA, a tiny bit of BTC, and bought some LUNA after the crash, but currently have no positions. I essentially made and lost nothing in all my adventures. I got out after realizing cryptos deadly swings were not for me and my stomach. For me, the 10 grand that I had in the market is a lot of money that I'm not willing to risk.<p>The only position I'd take is the free stuff that Brave hands out, if I ever switch from Edge to Brave, which is pending how this MV3 debacle turns out... and I would buy a small bit of BTC for a fun investment on a hard crash.<p>I agree with the author, the only one worth owning (if any) is BTC. From my former positions, I watched altcoins collapse with BTC, but did not always pick back up with the same fervor with BTC. Just crashed alongside it. For that reason, if I take a small position again, it'll be BTC.