The myth of the return to zero wealth of the currency circle ＂Maotai＂ was shattered, and the value of the big brother shrank by more than 80 billion US dollars.

Original Wang Yao Yao Bao bian

"core tips"

With the emergence of zero-based virtual currency, the belief in currency circle investment began to collapse.

Author | Wang Yaoyao

Editor | Zhang Zirui

LUNA, once called "Currency Maotai" by currency players, has been bloodbath in recent days.

This cryptocurrency, which soared from $0.12 to $119.5, and its market value once ranked fifth in the whole network, unexpectedly ushered in a plunge in the market. In just two or three days, the price of LUNA has almost reached zero.

As the original token of Terra, a stable currency linked to the US dollar, LUNA’s plunge also induced an overall decline in the encryption industry. As of 4: 00 pm on May 12, Bitcoin reported $26,628.17/piece, a drop of 15%; The price of Ethereum is $1,784.46, which is 55% lower than the high of nearly $4,000 two months ago.

At the same time, UST, an algorithm that was once highly anticipated, also appeared "anchored" many times in a short period of time.

In the virtual world of "code is law", the collective "out of control" of cryptocurrency has aroused people’s high concern about this emerging market: when the investment "faith" disappears, will the cryptocurrency that has lost its liquidity collapse to zero?

The coin circle is a river of blood.

In fact, this virtual currency is not the only one that has collapsed. On May 12, there were dozens of virtual currencies that also experienced a large decline. Bitcoin and Ethereum, which have relatively high market value, once fell by 15% and 20% respectively, and then stabilized, while dogecoin, which was caught on fire by "technical madman" Musk, also plunged by nearly 25%.

As for the reason for the "all-round crash" of the currency circle, a senior investor told Leopard Change that from a macro perspective, it was mainly the impact of the "radical" tightening of the Federal Reserve. On the one hand, the US dollar "flows back" from emerging market countries, and on the other hand, it is "recovered" from other non-US dollar risky assets, which makes the price of virtual currency, which has shone brilliantly in the low interest environment in the past few years, enter a natural decline stage.

It was Terra USD(UST), a "stable currency" linked to legal tender, that triggered this round of panic.

Most of the time, the conversion ratio between UST and USD is very close to 1:1. However, due to the recent massive selling of UST, it is decoupled from the 1:1 anchor of USD, and the anchored assets deviate from the mortgaged encrypted assets. When the market exceeds the tolerance range of UST’s "dual currency arbitrage", the price adjustment function begins to fail.

In order to maintain the price of UST, it is necessary to keep the price of UST stable by burning LUNA (casting one UST requires burning one dollar LUNA) and starting the reserve fund, so LUNA is also sold in large quantities, which also leads to both LUNA and UST entering the "death spiral".

Many people in the industry don’t seem to be surprised by the outbreak of the "Black Swan Incident". After all, the lightning storm of Fei Protocol, an algorithmic currency stabilization protocol, which occurred in April last year, has confirmed this point from a certain angle: algorithmic currency stabilization is still very risky at present, and its use scenarios are limited.

Let’s take a look at Bitcoin. Although dragged down by LUNA’s plunge, Bitcoin also experienced a large decline, but the price was supported at $30,000, which is also recognized as a key support point by many virtual currency analysts. As the world’s largest virtual currency by market value, Bitcoin is still relatively strong in the superimposed environment of quantitative tightening and high global inflation.

Big brother’s worth plummeted.

The collective plunge of cryptocurrency has dealt a devastating blow to the "worth" of many big names in the currency circle.

According to the Bloomberg Billionaires Index, Brian Armstrong, the founder of Coinbase, the world’s largest virtual currency exchange, had a personal wealth of $13.7 billion in November last year, which fell to $8 billion at the end of March this year. In the last month, his personal wealth has shrunk to $2.2 billion, and his assets have evaporated by nearly 84%.

The market value of Coinbase itself has also dropped by more than 80% in more than one month since the beginning of April, and it is expected that the transaction volume and monthly transaction users in the second quarter will be lower than that in the first quarter.

Domestically, Zhao Changpeng, CEO of Bi ‘an, suffered more losses than Brian Armstrong, Tyler and others. According to the Bloomberg Billionaires Index in January, Zhao Changpeng’s net worth was as high as $96 billion at the beginning of this year, but by May 11, this figure had shrunk to $11.6 billion, and the evaporation rate was close to 90%.

According to the information data of digital currency’s whole network contract explosion, nearly 400,000 people have been exposed in the last 24 hours, involving a total amount of $1.257 billion, and the largest single explosion is as high as $10 million.

On May 11th, Do Kwon, founder and CEO of Terra, shouted to people in the community, "I know that the past 72 hours have been very difficult for everyone, and I am determined to get through this crisis with everyone, and we will get out of the predicament together."

But just two days later, Do Kwon was hit in the face by the fact that LUNA was zero. His sentence "Terra’s goal is long-term development. The setback in May this year is similar to last year, which will not stop the development of LUNAtics. Short-term mistakes cannot define the future development. What is important is how to respond to setbacks." At present, the difficulty of implementation has been upgraded again.

People with investment experience in digital currency may not be surprised by the plunge in the currency circle, but LUNE’s price "zeroed" in two or three days still made many people feel stunned. Faced with the rapid decline of investment confidence, some investors shared their investment experience with Leopard Change.

First of all, in a slump like LUNA’s, there is bound to be an exchange running away in the market, so when people invest in digital currency, the security of the exchange is always the first.

Secondly, it is necessary to have a good investment mentality and stop profit/stop loss in time. After all, it is the most important thing to ensure the principal and "leave the bag safe". In the speculative market where high risks and high returns coexist, there will never be illusions.

Finally, try not to increase leverage, which is a new principle of more and more digital currency investors. Lever makes people swell, especially when touching the warning line and forcing the liquidation line, it will disturb the mood.

Virtual currency investment belief shattered?

In the past few years, with the increasing controllable funds in people’s hands, the market is increasingly enthusiastic about investing in digital virtual currency, and some people even regard this digital asset as a safe-haven asset of "side by side" gold.

Take bitcoin for example. The total amount of bitcoin issued is limited. To some extent, it is similar to gold, and it is a value target based on the "scarcity" characteristics of assets.

On the other hand, many people are not optimistic about digital currency like Bitcoin, and even think it is a "scam". The reasons are concentrated in these two points: first, cryptocurrency is intangible and imperceptible, and people will lack a certain sense of security from the psychological level; Secondly, mining wastes electricity and is not conducive to environmental protection. In most people’s minds, this highly energy-consuming existence will be resisted sooner or later.

Ms. Wang, who has always held a wait-and-see attitude towards cryptocurrencies, told Leopard Change, "In the past few years, many friends around me have invested in virtual coins such as Bitcoin and Ethereum, and from time to time, one wealth myth after another will emerge. But in my personal cognition, digital currency is highly speculative and really not suitable for people with low risk tolerance like me."

"Even from the perspective of a single investment, there are many incidents of money running away and assets being stolen in the industry, which greatly reduces its security." In Ms. Wang’s view, "even if some people tout digital currency’s strong risk-averse attributes, it is largely artificially created value. Once the market belief is shaken, it will inevitably lead to a large-scale decline."

Ms. Zhou, a senior virtual currency investor, started into the pit in 2016 and cleared her position in 2022. She believes that a core factor for the rapid rise of digital virtual currency in the past is the lack of effective investment targets in the market. "For some radical investors, digital virtual currency is an option, and with the rapid entry of institutional hot money, digital currency has also been speculated."

From a long-term point of view, cryptocurrency is a digital asset in the final analysis, but because it is not linked to industry, the value of cryptocurrency is very unstable, which is bound to show a sharp rise and fall in its price trend.

On the positive side, the recent plunge in the currency circle may also be a good thing for some investors. Because this is a very good opportunity, let everyone know more clearly what the essence of digital virtual currency is and whether to invest in such products.

"When a risk event comes or the environment changes, most people will not be spared. At this time, it is even more necessary for people to balance risks, returns and liquidity, and make a reasonable asset allocation combination based on their own asset quantity and financial product cognition. At present, I mainly buy funds and industry ETFs. After all, people can never make money beyond cognition. " Ms. Zhou said.

Do you think virtual currency still has value?

Original title: "The myth of the return to zero wealth of the currency circle" Maotai "is shattered, and the value of the big brother has shrunk by more than 80 billion US dollars."

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