Mad Hedge Bitcoin Letter
September 27, 2022
Fiat Lux
Featured Trade:
(AN INDUSTRY ON THE ROPES)
(LUNA), (BTC), (DAI)
Posts
Crypto’s and Terraform Labs co-founder Do Kwon is on the run.
Yes, that’s right – he’s a fugitive.
He was added to Interpol’s red list yesterday that alerts 195 countries to his status as a wanted fugitive. Today, we also found out that Kwon transferred 33,131 Bitcoins to himself right after he was added to the red list.
Kwon was the golden boy for stable coin for quite some time as the native South Korean’s brash attitude led him to billions in wealth.
His “fake it ‘til you make it” attitude has gotten him into deep water as quickly escalating investigations have been initiated against Kwon and Terraform Labs.
Why?
His brainchild Terra’s UST stablecoin lost its parity to the dollar in May in a $70 billion collapse and today shows a 99.93% loss.
Kwon and Terraform Labs fled South Korea for Singapore ahead of Terra’s meltdown, but Singapore police said on September 17 that he’d fled Singapore.
South Korean authorities want to question Kwon about alleged violations of capital markets law that has resulted in a slew of local suicides to investors who have lost everything.
Investigators also want to interview him to see if his company misled investors in labeling UST as a stablecoin.
They have said his stablecoin could achieve the definition of a Ponzi scheme.
It was only just earlier last year when Terraform Labs successfully rallied an audience of fans that called themselves the “Lunatics,” praising Kwon as the project’s outspoken hero as the price of its LUNA token rallied.
Kwon’s unique case has now set off US regulators with the intent of regulating stable coins more rigidly with even the possibility of an outright ban altogether.
The South Korean has sullied the stablecoin industry and the manhunt continues as Kwon claims he “is not hiding.”
U.S. lawmakers put forward a bill last week that would introduce a ban on UST-like algorithmic stablecoins, potentially threatening other decentralized dollar alternatives like MakerDAO’s DAI.
Cryptocurrencies have been littered with non-stop streaming of negative headlines in the past 12 months.
Bitcoin reaching $65,000 wasn’t in fact a celebration, but the calm before the storm before a myriad of structural problems was revealed as the price of Bitcoin collapsed.
Kwon's fleeing has not stopped his attempt at fixing LUNA, yet the price levels are barely a fraction of what they were before the collapse.
The international police case has heaped more fuel on the fire for incremental investors signaling them to stay away from cryptocurrencies and rightly so.
Kwon is highly likely to receive jail time in his native homeland of South Korea and legal experts can envision a prison time of over 10 years.
Financial fraud and running a Ponzi scheme are serious stuff in South Korea which is infamous as a place where Korean oligarchs regularly flout the law.
Delaying the inevitable is stirring up even more unrest for crypto as one of its big-time CEOs evades Korean law.
The longer he hides internationally, the longer the damage to the reputation of crypto.
The problem I have is that since crypto has no cash flow dispensing from it, the existence of these products enters a gray area of whether it is a Ponzi scheme or not.
Even more worrisome, stablecoins could become banned because of Kwon wiping out yet another set of crypto assets and crypto infrastructure.
It could cause yet more manhunts for crypto CEOs and the bankruptcy of the masses.
These events are highly bearish for the cryptocurrency industry, and I advise readers to head for higher water.
Mad Hedge Bitcoin Letter
May 12, 2022
Fiat Lux
Featured Trade:
(LUNA BLOWS UP)
(BTC), (ETH), (LUNA), (UST), (MSTR)
Altcoins won’t age well and 99% of them will vanish before our eyes. The way in which they exit also may or may not cause financial contagion.
We need to stop the arrogance already.
Let’s just default quickly to Occam's razor and back of the envelope math shows that we can’t have 1,000’s of these crappy digital currencies masquerading as real ones.
We need a few good ones and that’s it.
Sure, we have tried and tested Bitcoin (BTC) and Ethereum (ETC), but these other worthless pieces of code are hawked by mostly snake oil salesmen who are looking for a quick buck by preying on the naïve.
So don’t get greedy.
I hear many crypto enthusiasts tell me their strategy is to buy the cheapest and most obscure crypto possible and hope for a moonshot.
That’s a fools’ strategy and the money is better donated to cure world poverty.
So what am I really talking about?
The supposed stable coin UST and LUNA which was supposed to peg its value to the US dollar broke in a severe way as the algorithmic that was intended to uphold this balanced ratio went haywire.
10’s of billions of real dollars were wiped out from investors as the genius algorithms messed up in a big way.
This contagion has had the knock-on effect of dragging the price of Bitcoin and Ether down as many might assume a UST or LUNA holders might need to sell BTC to get some liquid currency.
It’s been a giant risk-off move for crypto in every nook of the asset class and even worse, a massive loss of confidence for the industry as a whole.
This was a gift to the detractors who say that crypto is run by a bunch of idiots or charlatans or something of that ilk.
The value of LUNA plunged on Wednesday as Terraform Labs creator Do Kwon laid out a plan to save its sister token, the stablecoin TerraUSD (UST).
In the last 24 hours, roughly $10 billion have been drained from LUNA. Its price has fallen 93% in that time from $32 to $2.25 per coin, with the price changing rapidly each minute. After skidding to a low of 30 cents per coin, UST has ratcheted up more than a quarter to 64 cents.
Down 30% in the last day after breaking its essential $1 peg over the weekend, UST trades at above 64 cents per coin while Terra’s LUNA token rebounded 61% to $2.25 after dipping below $1 at 9 a.m. New York time Wednesday.
In the first sniff of market turmoil, stablecoins have failed miserably and it also incentivizes government regulation to shut them down.
This of course gives ammunition to SEC Chairman Gary Gensler to move stablecoins under his jurisdiction.
He would kill the development in a second by pelting it with so many fees, bureaucracy, delays, hidden regulations, and obstructions that stablecoins will be swept into the dustbin of history.
The contagion has led to Bitcoin falling lower than $29,000 and we are getting dangerously closer to the $21,000 threshold where MicroStrategy (MSTR) will get a margin call.
Sell every and any rally in Bitcoin, this loss of confidence can’t be understated and crypto has failed miserably to attract the incremental buyer in a rising rate environment.
Don’t catch a falling knife.
