MoonFall, the fall of crypto prices are the result of a coordinated attack?
Since the beginning of the year mainstream media has been talking about the impending collapse of the crypto market, but after a stock crisis, a war, and the treats of new regulation nothing happened, until now…
Hello leofinance friends, I hope you are all very well. In the last few days we have all been a little uneasy, even so, at no time I lost faith in cryptocurrencies or in the platform, in fact, I thought about buying the dip. But now it seems that the crisis is passing and prices are recovering, although such a rebound is normal after such a sharp decline, and there is still concern about the stablecoin, a fundamental part of the cryptocurrency market ... and this is what we will talk about today.
What are stablecoins and how do they work?
The stablecoin are digital currencies that have a value anchored to a fiat currency, usually the US dollar, these coins are very important because the conversion to normal dollars, the purchase of cryptocurrencies, or saving in a stable currency that is not subject to the tides of the market easily fast and [usually] safe.
The strongest stablecoins on the market usually maintain the confidence that users have and the value of their currency in parity with the dollar by holding reserves in US dollars to back their digital currency in 1-to-1 parity, so that if at one point the public decides to massively withdraw their money and exchange their stablecoin for dollars or some other currency, the stablecoin would be able to meet all commitments without letting anyone down.
MOON
.Now, we all knew that in the face of worsening global economic conditions, a possible recession in the US and a crash in the financial markets, there was a possibility that cryptocurrencies would depreciate, as many whales [large capitals] that came from the traditional equity markets to the cryptocurrency world looking for quick profits, would liquidate their assets and flee to 'safer' investments. However, this did not happen as many people expected.
However in the last few days began a tremendous fall in the prices of cryptocurrencies, which was exacerbated by the collapse of LUNA and Terra, the cryptocurrency and stablecoin of Terraforming labs, this Implosion was both cause and effect of 'Depegging' ie, the separation of Terra from the 1 to 1 parity with the dollar, that is to say, the stablecoin that was to be the safeguard of the capital of many and a stable medium of exchange that ensured prosperity, lost its value, this in turn caused a stampede that left the Terraforming labs project on the ground.
The fall of a stablecoin, [aided by other factors that we will discuss later] the third largest to date, created an expansive slingshot in the market and spread widespread doubt towards stablecoins, this in turn prompted more investors to liquidate their crypto positions, which affected prices so much that at times, the strongest stablecoin in the market, the USDT or Tether made a small depegging of 1 to 1 with the dollar. But it was small and did not last long.
And is that Tether and Luna work very differently, Tether is a project with more time of trajectory, much more capital and trained personnel, and that manages its backing in hard currency 1 to 1 without any concern.
While LUNA maintained its pegging with a regulation algorithm that created and destroyed its currency to keep supply and demand stabilized. And thus keep the pegging 1 to 1.
In cryptocurrencies, trust is a vital factor for the success of a project, and realistically, Tether with its traditional currency backing inspires more trust than LUNA. However, it seems that it is not only market dynamics and the fall of a weaker project, something common in all markets that has generated all this. There is something else...
For almost a week now users have been reporting strange movements on the Terraforming labs network, massive withdrawals of the Anchor and Curve protocols.
Then a single wallet withdraws almost 200 million dollars in UST to take it to other cryptos.
On the media side, even now while cryptocurrencies are recovering and Terra has already recovered almost half of its value, they are still talking about the imminent collapse of cryptocurrencies.
and to increase the tension, in social networks like Twitter or Facebook we can see many new user accounts, with generic profile pictures, with no followers and one or another page followed, spreading panic messages and talking about the imminent collapse of the cryptocurrencies something really very curious at least... it is as if many factors have converged to attack the stablecoin, since they are a more vulnerable point than the cryptocurrencies themselves, and the strongest ones survived the attack...
Still, this is merely speculation, but it is worth remembering that governments, big tech companies, and big investment funds like BlackRock and others have many reasons to wish the demise of cryptocurrencies, reasons that I have mentioned many times in my posts....