The recent implosion of TerraUSD and the Luna cryptocurrency is going to have lasting ripples in the cryptocurrency and digital assets space. Watching a multi-billion collapse created losses and panic throughout the space in ways that many crypto investors never imagined. After all, TerraUSD was supposed to be a stablecoin. Unfortunately, with some reminders of the leveraged products that contributed to the global financial crisis ahead of 2008, an algorithmic formula has flaws.
Collectors Dashboard evaluates high-end collectibles as an alternative asset class. This implies that certain collectibles are attracting he same money that could have otherwise been invested into stocks, bonds and even real estate. This of course overlaps with alternative assets like digital assets, gold and so on.
Now that the crypto market has exhibited at least some stabilization after the panic, it is important to consider whether or not there is a need for any more cryptocurrency launches. There will almost certainly be continued efforts where nations are launching their own central bank digital currencies (CBDCs). And there will of course be many more “I have a new idea” cryptocurrencies that try to launch.
Now that the crypto market has been so rattled, it is likely that even the newest digital investors will stay away from new Initial Coin Offerings. The rule about “Never say never!” certainly comes to mind, but ask yourself this one question — why on earth, with the thousands of cryptocurrencies that already exist, would any investor decide that a new ICO is necessary and worthy?
Again, never say never. More ICOs will occur. Just do not ever forget that there is a consensus that the future may only have room for a tiny fraction of the cryptocurrencies that exist today. A video has been shown of Do Kwon, the creator behind UST, laughing before his own digital implosion that 95% of all cryptocurrencies will die. He may not have known that he also meant his “stablecoin” so soon.
First and foremost, stablecoins can only be as stable as the hard assets that support their stability in the first place. Having an algorithmic peg may sound like it works fine, but having too much held by too few players comes with severe risk. This jumps back about 15 years when Wall Street brokers and traders were dealing in derivatives that the public was by and large in the dark about — collateralized debt obligations, credit default swaps, and the trillions of dollars in over-the-counter derivatives that banks and financial institutions were passing amongst each other as the financial hot-potato.
Now it even seems fair to wonder if a carbonization scoring and ranking of cryptocurrencies will matter beyond their stability and utility.
An initial coin offering is the crypto-equivalent of an initial public offering in the stock market. A digital offering behind a new coin, token, app or service will fall under this in an effort to raise new funds.
If any new ICOs are being evaluated now or in the near future, they need to have some utility related to their efforts, products or services. Any new ICO of just another cryptocurrency because it has names behind it or because someone with deep influence touts it on social media is something that digital investors may be taking a lot of caution about.
The mighty Bitcoin paid a big price during the collapsing value of NASDAQ stocks, and it paid an even greater price once the digital ripples of the Terra USD and Luna worked their magic in the markets. Bitcoin was above $42,000 less than a month ago. At the depts of the UST/Luna fallout the price of Bitcoin almost hit $25,000 again. And while Bitcoin was almost back at $31,000 at the start of this week, the last look was back under $29,000.
And on top of 15 basic tax implications for crypto, now many investors have to contemplate whether annual loss limitations will come into play.
Again, “Never say never!” comes to mind for any new cryptocurrencies. Saying “A long time” is much easier.
Categories: Digital& NFT