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Bitcoin collapses (again), the reasons for the crisis and the end of the democratic utopia of cryptocurrencies

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Bitcoin collapses (again), the reasons for the crisis and the end of the democratic utopia of cryptocurrencies
Written by aquitodovale

NEW YORK – For the dreamers who for half a century have been convinced that technology will inevitably produce economic and political democracy, that of cryptocurrencies had to be an innovative financial market: anti-authoritarian version, less speculative and more stable than capitalism, far from the rapacious Wall Street model. Someone, more pragmatically, thought that bitcoin, ether and other digital currencies issued by individuals would become a useful refuge for savers in times of financial crisis or in the event of wars and revolutions: a store of value like gold, but easier to transfer digitally if a conflict forces you to flee. Who he wanted to limit risks, then, he could focus on stablecoins, theoretically linked to the dollar and guaranteed, because against the issues there is (or there should be) an adequate liquidity that can be liquidated at any time to meet the redemption requests.

The collapse of bitcoins

Today, at the end of the “horrible week”, the e-money market collapsed even more dramatically than the stock exchanges and technology stocks that in 6 months they have lost over a third of their value (from -74% of Netflix to -5% of Apple passing through -39% of Amazon and -45 of Meta-Facebook) it is easy to liquidate those who have invested in this field (not the hit and run speculators, but who has credit) as a mass of gullible who have ignored obvious laws like gravity and are now being punished. The “big old man” of finance, Warren Buffett had warned them: Bitcoins are rat poison. They didn’t listen. Indeed, they preferred to cheer Peter Thiel, a billionaire in Silicon Valley technologies and ideologue of the rebellion who just a month ago, at the Bitcoin Conference in Miami, had drawn a bright future for cryptocurrency and announced the imminent demise of the gerontocracy of financial capitalism: between the dying, Thiel had put his own Buffett, along with the heads of JP Morgan Chase and the BlackRock fund.

TerraUsd and stablecoins

Well, someone says: after all that bitcoin (value more than halved since December) was not a real store of value had already emerged for months with the Ukrainian conflict that has waged growing demand and price of gold while cryptocurrencies, not in great demand, they continued to lose value. But things are not so linear, the more complex reality: Buffett demonized bitcoin, but then his Berkshire invested a billion dollars in a cryptocurrency bank. And decentralized finance idealists left Miami disappointed that their conference was overrun by the old Wall Street finance sharks who had sniffed out the deal. When the lifeboat began to sway in stormy waters, i first to flock to go down were speculative funds who, fleeing en masse, contributed to the disaster. Particularly spectacular was the collapse of TerraUSD, a stablecoin whose anchoring to the dollar had to be guaranteed by a sophisticated algorithm and by a sister currency, Luna, called upon to act as a counterweight in the event of instability. When the panic began, the mechanism devised by Korean technologist Do Kwon jumped: this week TerraUSD has lost more than three quarters of its value, while the quotation of Luna practically zeroed. Which threw Do Kwon followers (who call themselves “lunatics”) into the darkest despair: Reddit, once a meeting place for rebels who organized punitive missions against Wall Street brokers, today records tragic messages from investors who have lost everything and are thinking of suicide.

Will it be a crisis?

Will it be a devastating crisis, a tsunami like that of 2008, or a growth crisis like the bursting of the technology bubble of 2000 that cleared the market? Leaving some hope is the fact that the most serious and well-capitalized stablecoins so far have not ended up in the storm. Certainly, the crypto crisis cannot be dismissed as the end of a folkloric anomaly: by now this alternative finance (which in one day burned 200 billion dollars in value) has become such a huge phenomenon that it also weighs on market trends ” officers “. Analysts note that, with all of its algorithms, the EarthUSD escape resembles the bank runs of the Great Collapse 90 years ago. with the assault on bank branches. Then came regulated credit and current accounts guaranteed by deposit insurance and such extreme episodes have never happened again. American authorities and politicians will also have to reflect on the consequences of their failure to regulate.

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