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  • It's exactly a week since one of the biggest supposedly most stable cryptocurrencies took a massive tumble.

  • It's still down since then and the crash sent shockwaves throughout the community of users.

  • One popular token Terra Luna lost 99% of its value from a high of $118 To just nine cents, spooking investors and sending Cryptocurrency markets plummeting the entire crypto markets now reportedly worth just over a trillion dollars.

  • Just a third of its value.

  • Six months ago, it all started just 12 years ago in 2010 1 Bitcoin.

  • The first Cryptocurrency was worth less than one us cent at its height last year it hit $68,000.

  • Latest estimates say there are more than 300 million crypto users worldwide attracted by the lack of regulation and huge potential rewards.

  • All investments go up and down.

  • So does the terror lunar signal, the bursting of the crypto bubble or just a normal readjustment.

  • I'm joined now by David.

  • Gerard who is a Cryptocurrency journalist and author.

  • Thank you so much, David for joining us.

  • I'm sure you just heard those questions.

  • I mean is this just a bubble that's finally burst?

  • So we've had crypto bubbles before 2013 and 2017.

  • Um and what tends to happen was they clearly hit their high and the party was clearly ending but they took about six months to a year to deflate.

  • So I think we're in the sort of deflating stage at the moment.

  • I think the bubble really fell down around mid last year is when retail dollars.

  • Mums and dads and ordinary people looking to get ahead when they got out of it.

  • And ever since then it's sort of the industry has been frantically trying to recruit new customers doing ads at the Super Bowl and so on.

  • It's a bit frantic trying to lure people in.

  • So the U.

  • S.

  • T.

  • Collapsed last week.

  • I mean that sort of collapse happens all the time in the chunkier reaches of the crypto economy but it's really put the frighteners on people.

  • So there's been a definite loss of confidence and just help our audiences understand why those users stepped away and pulled out.

  • So U.

  • S.

  • T.

  • Pretended to be a stable coin worth $1.

  • Exactly.

  • You know, so I didn't go up and down like Bitcoin.

  • But what it really was was U.

  • S.

  • T.

  • Was a token that was priced in another token.

  • That token was priced in ether, the currency of ethereum and that was maybe priced in dollars.

  • So it's a really long chain of leverage.

  • We've seen that before.

  • This is like a very mini version of the 2000 and eight financial crisis when you had money market funds with hugely over leveraged things, they said were dollars.

  • But we're really bets on bets on house prices, essentially a Ponzi scheme then the way you're describing it, it does work in the way that early investors can only pay with dollars from later investors when you're talking about the actual dollars.

  • Um if I would I wouldn't call it a Ponzi because that would be ascribing intent but it works the same way I mean and and we all know I mean the most famous one is Bitcoin but but it's a crowded market of cryptocurrencies.

  • Just tell us about some of some of the main ones.

  • Well there's a big quantity ethereum and the main ones you can trade for actual money.

  • There's a lot of other coins that are derivatives of those or derivatives of derivatives.

  • Ust was one of those hugely over leveraged.

  • They said it had a value of $18 billion dollars but that was imaginary money.

  • This crypto market cap of trillions or hundreds of billions.

  • Those are made up numbers.

  • Virtual numbers that money never existed, actual dollars are a lot scarcer as a piece of finance.

  • It's a very small market but when a number is going up it's in the headlines, so how many Bitcoins are there in the world?

  • And is there a limit?

  • There's 19 million bitcoins there can only ever be 21 million bitcoins but anyone can make their own magical Internet money.

  • And thousands of people have U.

  • S.

  • T.

  • Was one of these you know magical internet money.

  • You just make it up one day say it's got a price tag and say it's worth a dollar and then you've got countries like Venezuela El Salvador very much trading in Bitcoin as one of their main currencies when you see a crash like this.

  • I mean how devastating is it for them?

  • Well, Bitcoin in El Salvador has been a disastrous failure essentially $200 million dollars that they couldn't spare has gone up in smoke.

  • It's quite bad and the country is now in a lot of trouble.

  • They use the dollar as their currency so they can't just print more currency.

  • They've got to pay all their bills and balance their budgets every year.

  • It's a real problem for them because the international markets are calling and they want their bonds paid.

  • So do you now have a situation where sure a lot of wealthy people made a lot of money but then you also have this gap with ordinary people essentially trying to get rich quick and now you have a situation where this is crashing and the risk is very much being exposed.

  • Very much so now you can totally make money in crypto but It's a zero sum trading environment, it's very rough, very unregulated.

  • You may lose your shirt and no one can make money in crypto unless the money comes from someone who lost it.

  • So it tends to go to the big guys from the moms, the dads, the grannies, the young people who are desperate and looking for a way out of their situation.

  • It's really worrying.

  • There needs to be more investor protection on this stuff and that's the point that I wanted to just pick on the fact that there is really no government regulation, depending on which country.

  • There's a few regulated exchanges that are well behaved, but the vast majority of crypto trading happens in unregulated offshore casinos, where there is literally no rules except what they can get away with and not lose customers sometimes, but sometimes they're not.

  • Yeah.

  • So here we are in this vicious, vicious sort of financial year for financial markets.

  • And it's, would you say, being particularly devastating in the crypto world, it's basically when the stock exchange sneezes, crypto catches a cold, so crypto doesn't influence the stock markets, but the stock market has influenced crypto.

  • So when the NASDAQ went down a week before us t went down, Bitcoin lost about 10%, that sort of thing.

  • David, thank you so much for helping me and our audiences better understand that world.

It's exactly a week since one of the biggest supposedly most stable cryptocurrencies took a massive tumble.

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    林宜悉 posted on 2022/02/20
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