The collapse of LUNA & UST is going to make a great movie one day. It’s still too early for the real story to emerge, but it’s looking juicy.
There are MANY players involved, and we would need a full infographic family tree to see how they are all connected. But for now, what do I think is most important?
1 - Let’s save the whodunnit story for later. It’s very clear to me this was an engineered situation, and not a random thing that sometimes happens in financial markets.
It’s very likely there will be a scapegoat because humans love to have someone to blame so that we can feel like justice was served and we move on with closure.
It’s also very likely that the people who profited from this collapse will walk away very wealthy & unharmed (other than a guilty conscience but not sure how much they care about that).
2 - As a small retail investor, there are lessons to learn, and choices for me to make.
What are the lessons?
How can we avoid getting wrapped up in another sad fiasco like Terra LUNA?
One lesson is to be careful of David vs. Goliath narratives.
I fell for Terra because I loved the story of the decentralized stablecoin offering the people (us) an alternative to centrally controlled fiat.
But it turns out that most crypto is not really that decentralized.
The Terra Foundation led by Do Kwan makes the decisions, and were not playing nice with the big banking guys. Do was also hot headed and made large bets ($200M) on Twitter around the price of the LUNA token.
While that was fun to watch, it’s not how the responsible leader of a multi-billion dollar financial institution should act.
I see that so clearly in hindsight but ignored the warning when it was given.
However, it’s not helpful to focus too much attention and blame on Do Kwan.
That ship has likely sunk, but moving forward, I’ll look differently at crypto project leaders.
3 - As much as I would love to see the central bank fiat scam go away, and be replaced by something that serves the people, big banks have power.
The people who control the money supply, and have access to billions upon billions, can easily manipulate markets.
I read many threads last week about the specifics on how the prices of $UST, $LUNA and $BTC were manipulated (which led to the collapse), but even if I wanted to do something like that myself (I don’t) I would be unable.
That is a different world than the sandbox I play in.
What’s the lesson? Don’t bet against the big money guys.
4 - BlackRock has invested heavily in Circle $USDC. They have the means and the motivation to make $USDC the MAJOR stablecoin within crypto.
But BlackRock is much bigger than crypto - they are global institutional finance. That world currently revolves around the US Dollar (which is collapsing from creating too much debt).
The signs point to the US Fed launching a Central Bank Digital Currency (CBDC) and using $USDC as that currency.
5 - In order for $USDC to win, $USDT has to get taken out. This is pure speculation, but currently the crypto market, specifically bitcoin, is dependent on $USDT.
We’ve been warned about $USDT. Elizabeth Warren attacked $USDT in congressional hearings earlier this year.
Articles have been written that Tether has not fully backed USDT. Dots have been connected between Evergrande and Tether. The stage has been set.
How many times has USDC been publicly criticized?
None that I have noticed.
It looks protected.
If I am right about this (I absolutely could be wrong BTW), we would need to see a big ugly mess with USDT and Bitcoin.
Don’t fret though because $USDC and the US government will come along to save the day.
Problem > Reaction > Solution.
If you have funds that you want to hold in a stablecoin,
all signs point to $USDC being the best option.
6 - What are good investments from here on?
I personally think there will be a pump in the coming weeks, and then a big ugly crash.
What will start the pump? MY GUESS - totally a GUESS - the case with Ripple and the SEC will settle and lead to a pump. Lot’s of indicators pointing to that being settled or dropped well ahead of the November date connected with the courts.
Remember when I said that humans love a scapegoat to take the fall? It’s a possibility that the SEC will take the blame and another group (the treasury? the fed?) will emerge as savior.
It’s a mistake IMHO to assume that all the financial elite players are on the same team. They operate as a cartel like the mafia which means they have aligned interests but will take out one of the players when it’s necessary.
7 - Watch who is aligning with $USDC, and the big financial institutions building systems that use $USDC.
I have been studying ISO 20022 which is the next version of SWIFT. The companies that are part of the next system *may* be the strong investments in the next cycle.
This includes Stellar $XLM, Algorand $ALGO and Quant $QNT - but it’s too early to tell which will catch on with mainstream investors.
Summary:
$LUNA & $UST were imperfect systems with good intentions, however, their fall didn’t happen by accident.
$USDC is emerging as the dominant stablecoin
Get ready for a roller coaster so that $USDC can take its place at the top of the foodchain
Watch the players who align with $USDC and the big institutions investing in systems connected to $USDC
BTW - I would be totally wrong about all of this. I’m not a time traveler or a psychic but it looks like this where we are headed.