Crypto Market Overview May 12th | Dex-Trade
Terra is the First Victim of Massive Crypto Market Collapse
Since Sunday, the digital asset market has entered a phase of uncontrolled decline, the first victims of which were the UST algorithmic stablecoin and the LUNA digital coin owned by Terra. After several attempts to recover assets, today they are trading at $0.59 and $0.04, respectively. From a financial point of view, this is called the collapse of projects. But why did this happen? On the one hand, general market sentiment has been rather pessimistic for several months now, and the brewing powerful economic crisis due to the RFs military invasion of Ukraine and the redistribution of influence spheres in the energy sector is daily “adding fuel to the fire” of the market that has not yet strengthened after the crypto-winter. On the other hand, the UST rescue plan proved to be ineffective. Under stable conditions, the stablecoin algorithm tracked the demand for it and adjusted its supply accordingly to keep its value near $1. If the supply increased and the value of UST fell, the algorithm encouraged users to burn UST in favor of minting new LUNA coins and vice versa. On Monday, Terra founder Do Kwon initiated a UST token burn in exchange for newly minted LUNA coins to keep the price of UST as stable as possible. But the shock of an instant increase in supply caused LUNA prices to drop, after which panic selling finished off both coins. Some market “detectives” speculate that BlackRock and Citadel Securities, the world's largest asset managers, may be behind Terra's collapse. This is an interesting, but not yet substantiated concept, so for now we can only watch how one of the strongest and most promising projects on the market “goes under water” in just a few days.
Is Coinbase in Danger of Bankruptcy?
One of the largest US crypto exchanges, Coinbase, published a report for the first quarter, which indicated a quarterly loss of $430 million, as well as a 19% churn of platform users, and this figure was obtained in just one month. The icing on the cake of this "smashing" news was a warning to the company's clients that keeping their funds in exchange accounts could lead users to bankruptcy. The point here is that Coinbase now owns $256 billion of its users in fiat and cryptocurrency, and if the trading platform goes bankrupt, these funds will also be subject to bankruptcy proceedings, and the users will be considered “general unsecured creditors” who do not have the right to demand from exchange any particular property in a judicial proceeding. That is, users will not be able to access their funds. True, the CEO and co-founder of Coinbase, Brian Armstrong, quickly tipped tweet immediately after the publication of the warning and said that the exchange was not in danger of bankruptcy. The catch turned out to be new US SEC requirements for public corporations that manage crypto assets on behalf of others. Well, of course, it's much calmer...
Tether Lost Its Peg to USD for a Couple Hours
This morning, the largest stablecoin Tether (USDT) fell to $0.95, after which the asset’s value began to recover and is now trading at $0.9939 with a capitalization of $82 billion. The incident was another signal that unpredictable events are now taking place in the crypto market. Given the fall of BTC to $28,058, that is, another 10% per day, the fate of many assets remains unknown. Tether CTO Paolo Ardoino has already reminded users that USDT is backed by real dollars. Although, we remember very well that the company was punished for the lack of transparency in the storage and registration of funds, and was also fined $41 million by the US Commodity Futures Trading Commission for false information about its reserves. At the same time, Ardoino stated that the company is paying a $1 repayment per coin and that it has processed more than $300 million in the past 24 hours “without breaking a sweat.” It's time to feel confident in the future.