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Crypto crash: almost $1 trillion wiped off markets as Bitcoin hits lowest level since 2020:
It's been a nightmare week for cryptocurrency holders as the market crashes and Bitcoin hits its lowest price since December 2020. Ethereum, BNB, XRP, and many other digital coins have also fallen to their lowest levels in a long time. The crisis came after stablecoin Terra, designed to trade 1:1 with the US dollar, collapsed.
TerraUSD (UST), the 11th largest cryptocurrency by market cap, is an algorithmic stablecoin that uses a set of smart contracts to ensure its value stays as close to $1 as possible. But after hovering at around $1 for about a year, it crashed to 29 cents yesterday, plunging its market cap from more than $45 billion to less than $5 billion. It has since rallied to 62 cents, but that's still far from $1.
Terra's support coin, Luna, has also plummeted in dramatic style, going from $86 at the start of the week to its current price of 20 cents. Terra is designed so traders can exchange 1 UST for $1 worth of Luna, no matter the price of UST
[...] Do Kwon, co-founder of Terra developer Terraform Labs, tweeted: "I understand the last 72 hours have been extremely tough on all of you - know that I am resolved to work with every one of you to weather this crisis, and we will build our way out of this."
Terra's collapse has impacted many cryptocurrencies, the most notable being the biggest one of all: Bitcoin. At the time of writing, BTC is at $27,236, its lowest value since before the crypto boom at the end of 2020. Bitcoin has now lost nearly two-thirds of its value since peaking at $69,000 in November 2021.
[...] The good news for non-crypto-owning gamers is that the freefall will doubtlessly make mining less profitable, and should push graphics card prices even closer to MSRP.
(Score: 5, Touché) by Thexalon on Sunday May 15 2022, @02:18PM (19 children)
"This electronic token thingy that we just made up is valuable, and will get a lot more valuable without you having to lift a finger, we the people selling it really really promise!"
I mean, these things have less in terms of financial fundamentals or ownership over real-world assets than mortgage-backed securities and credit default swaps, and those of us with a memory of at least 14 years know how those turned out.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: -1, Redundant) by Anonymous Coward on Sunday May 15 2022, @03:40PM (12 children)
If you didn't notice, most tech stocks are down by 50% too. Even with amazing earnings and guidance, AMD is still near 50% of its peak.
Many stocks are down closer to 80%.
(Score: 5, Insightful) by Thexalon on Sunday May 15 2022, @04:09PM (10 children)
You plainly don't understand what I mean by "financial fundamentals". Maybe I wasn't clear about that, but here's what I'm getting at: How does the financial asset reflect ownership rights over a thing you could do something with?
For example, in real estate, the fundamentals are that there's a patch of land, and if you own that thing you have a bunch of things you're allowed to do on that land and in any buildings that might be on it that you can't legally do if you don't own it and don't have the owner's permission to do the thing.
In the case of tech company stocks, the fundamentals are:
- Their physical assets: Any offices they own rather than rent, workstations, servers, data centers, factories, etc.
- Stuff that they like to call "intellectual property": Copyrighted code, designs and inventions that are still under patent, trade secrets, branding and trademarks, etc.
- Ongoing sales contracts where some customer already promised to pay $X in return for service Y.
So, in the event that a tech company goes completely belly-up, and nobody wants to buy them out, they'll sell off all of that stuff to get some cash to pay for, in approximate order:
- Employee payroll not yet paid out.
- Legal judgment creditors
- Contracted creditors
- Bond-holders and bank loans
- Stockholders, who are admittedly the last to get a bite of the apple, but they can get a bite depending on the circumstances.
And that's a big part of why the stocks of companies with valuable assets tend to be valued higher, because all that stuff can be used to reduce the risk.
With crypto, though, there is nothing to sell off: The calculations that went into mining a coin aren't something that can be used by anyone else for any particular purpose. And that's an important difference. You don't even get a pretty flower out of it!
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 0) by Anonymous Coward on Sunday May 15 2022, @06:01PM (3 children)
Don't tell that to the people that did sell off and caused this little "crash". Now they speculate where the bottom is and will buy back. Sounds like any other day in the stock market
(Score: 1) by khallow on Sunday May 15 2022, @11:53PM (2 children)
But will they be buying crypto or dead cats armed with razor blades?
(Score: 0) by Anonymous Coward on Monday May 16 2022, @12:18AM (1 child)
If they make a profit, who cares?
(Score: 0, Redundant) by khallow on Monday May 16 2022, @01:44AM
(Score: 0) by Anonymous Coward on Sunday May 15 2022, @11:58PM (5 children)
"With crypto, though ..."
You can almost say the same thing about fiat currency ...
(Score: 0) by Anonymous Coward on Monday May 16 2022, @06:47AM (3 children)
You can say anything about anything. With fiat currency, the value is driven by the fact it's legal tender in some nation. Want a visa to Fooland? You have to pay for it in Foobucks. Want to run a business there? All the licensing requirements and taxes are in Foobucks. Nations use various legal frameworks and yes, coercion to drive a requirement to buy their currencies. You need USD because the USA says so. What entity exists that has a monopoly over something (such as land, and the resources it contains) and insists that you pay with crypto?
(Score: 0) by Anonymous Coward on Monday May 16 2022, @12:14PM
Well, there is El Salvador ... but then they also have USD and they don't make either.
https://www.bloomberg.com/news/articles/2022-05-12/el-salvador-s-bitcoin-losses-are-as-big-as-its-next-bond-payment [bloomberg.com]
(Score: 0) by Anonymous Coward on Monday May 16 2022, @01:39PM (1 child)
"With fiat currency, the value is driven by the fact it's legal tender"
You mean like Venezuela
(Score: 0) by Anonymous Coward on Tuesday May 17 2022, @03:16PM
And? Pointing out that fiat currency can go the way of Bitcoin is not a win.
(Score: 2) by Mykl on Tuesday May 17 2022, @10:52PM
No, you cannot even remotely say this. Fiat currency may not be backed by gold, but there are plenty of government assets (land being only a very small part of it) that can be used to support owners in the event of a problem.
(Score: 5, Insightful) by captain normal on Sunday May 15 2022, @04:11PM
From what I see, way too many tech stocks are vapor-ware also. Look at how many companies with billion dollar stock market value have made little or no profit for years now.
Everyone is entitled to his own opinion, but not to his own facts"- --Daniel Patrick Moynihan--
(Score: 5, Insightful) by Immerman on Sunday May 15 2022, @07:06PM (4 children)
"This printed paper token we made up is valuable, and will remain so. We the government selling it really, really promise!"
Currency is by it's very nature a social construct with no inherent value. That's the entire *point* of currency - if it has any real value it loses most of its value as a medium of trade. Sometimes in the past it was based on a rare but useless substance like gold - either directly or via government promise, but it's still ultimately nothing but a worthless token that people agree has a poorly defined value determined entirely by what real-value goods people agree it's worth that day.
Generally speaking that's determined by the value of goods and services traded for those tokens, divided by the number of tokens in circulation. And that means it can change on a dime in response to unfolding circumstances. Start making a lot more tokens, and the value of all of them plummets. Lots of people decide they don't trust your tokens and trade using someone else's instead? The value plummets. (a legitimate concern for the US, since most US dollars are circulated by foreign institutions completely outside direct US influence)
Some people like to assign great significance to the government's requiring taxes be paid with a specific token, or guaranteeing it as valid tender for all debts. And that definitely helps a new currency get established, but ultimately is largely irrelevant to its value once established. Taxes are then a tiny portion of the "trade" conducted in those tokens, and we've seen in the past that if then token's value plummets, creditors will go to great lengths to avoid being available for any repayment of debts counted in those tokens until they regain their value.
(Score: 0, Troll) by Anonymous Coward on Sunday May 15 2022, @10:20PM (3 children)
》Taxes are then a tiny portion of the "trade" conducted in those tokens,
The Democrats are working to fix that.
(Score: 0) by Anonymous Coward on Sunday May 15 2022, @10:46PM (2 children)
I didn't know you 1-percenters hang out here.
Just imagine: they might want you to actually pay SOME tax! I know, crazy idea, blast from the past.
(Score: -1, Troll) by Anonymous Coward on Tuesday May 17 2022, @01:53AM (1 child)
Riiight.
Because nobody outside the top 1% of earners could possibly look at the amazing, sterling, magnificent, glorious, stupendous work that the democrats have done with the economy, the national budget and think:
"Holy axle grease, Batman, these chucklefucks have found entire new pooches to screw!"
Oh noes! Narrative derailed! Quick, something-something-fascist-nazi! Say it! Say it now! Or are we back to republican/deplorable/voting-against-own-interests crap?
(Score: 0) by Anonymous Coward on Tuesday May 17 2022, @03:22PM
When did you stop??? Maybe if you weren't busy trying to repeal civil rights and other freedoms then you wouldn't be called deplorable. Maybe if you stopped supporting politicians that tax the poor for hand-outs to the rich then you wouldn't be voting against your own interests. What burns you up is you know it is true, you're not stupid, but you believe the lies from Fox and other rightwing pundits spreading Fear Uncertainty and Doubt. They have you by the balls, well, amygdala!
(Score: 0) by Anonymous Coward on Monday May 16 2022, @11:35PM
The credit default swaps were incredibly valuable when the CDO's they were insuring found themselves in need of insurance. As for mortgage backed securities, they do just fine, relative to their credit rating, under normal conditions. The issue was sub-prime mortgages being sold as AAA rated. It was rampant fraud that caused 2008, not securitized debt or swaps.