The following is a news opinion and NOT financial advice.
If you’re into trading or investing in cryptocurrencies you already know it’s been a rocky ride. Just one roller coaster crypto-ride – Bitcoin – stands out since it hit a peak on November 8 last year. And has tanked 70% of its perceived value since.
Today the online crypto-gurus are still promoting the narrative that the good times are still ahead, that crypto currency will recover and eventually exceed their past highs, etc, etc. Like the religious faithful, it’s in their best interests to gather more followers (investors) to the flock.
But there have been a few red flags over the past month that even the most enthusiastic crypto-zealots must be a bit nervous about (though they’d never admit it publicly).
Keep in mind that there are few regulations or controls on most cryptocurrencies and, whilst there are genuine gains to be made, there are also catastrophic losses for some, and with almost no legal come-back.
The bottom line in all of this, despite the thousands of hours devoted to charts, graphics, and imagined ‘trends’, few of the gurus predicted the current drop, or likely further drops in the value of the digital currencies.
In fact, the chances of the value of your crypto-investment going up or down today are precisely equal.
Some of the most obvious red flags over the past month are the fleet of crypto-exchanges that have completely tanked, locking up their ‘value’ in a crypto version of a run on the local bank.
HERE’S a list of 2,417 launched and failed crypto currencies.
In what is being seen by some as a backwash of all the crypto-scams from the system, its been a brutal month for alt-coins, the larger cryptocurrencies, and the exchanges that provide a link between the coins in your pockets and the imaginary digital coins.
Users of Solana-based borrowing and lending service “Solend” voted last week to force a “takeover” of Solana’s largest account holder, aka. a “whale”, whose “extremely large margin position” was becoming dangerously close to a catastrophic “on-chain liquidation cliff”. (A whale is a large share or stakeholder in a particular ‘coin’)
Now imagine if your bank decided uni-laterally, to decide to “takeover” a large customer’s account.
Solend Labs said they exercised their “emergency powers” to liquidate the whale’s digital assets saying that the on-chain liquidation of the whale’s position “could cause chaos” in Solana’s DeFi markets.
You can read more about the details of this outrageous seizure of assets, either real or imagined, partly written in crypto-speak, HERE.
But this is the wild-west environment you are locked into where the ‘inventors’ of these coins, or managers of the exchanges, make up their own rules in a new and opaque unregulated environment.
In the case of the most popular crypto-currency, Bitcoin, the pseudonymous inventor of the Blockchain technology and database, Satoshi Nakamoto, remains a mystery – an imaginary crypto-prophet who set the cryptocurrency bug alight in 2009.
Then there’s been liquidation rumours circling Three Arrow Capital and Celsius, both exchanges in the decentralised finance ecosystem. If not liquidation, traders and investors have been locked out of extracting their ‘cash’ at the moment. Will they ever see anything for their faith in these exchanges?
Meanwhile, Binance US and its CEO were sued last week by an investor who alleges the cryptocurrency exchange falsely marketed Terra USD as a “safe asset” ahead of the so-called stablecoin’s collapse in value during May.
(Stablecoins are digital tokens pegged to the value of traditional assets, such as the US dollar, and are popular as so-called safe havens in times of turmoil in crypto markets. But Terra USD’s value plunged last month, breaking its 1:1 dollar peg and contributing to a tumble in other crypto assets like Bitcoin.)
We could list a hundred more OMG moments for the crypto-enthusiasts, particularly over the past 2 months. Suffice to say their faith and resolve are being sorely tested. Most recent ‘investors’ have 2 choices at the moment – sell at a loss or hang in there.
The YouTube crypto-chart-peddlers are hanging in, confident of the ‘great recovery’, lavishing their hate of ‘fiat’ currencies, but other investment watchers are saying there could be more downside to come.
Whether the values in the cryptocurrency space start to creep up again or drop to zero, no one knows. Really, no one.
For now, flip a coin, a real one.
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