The crypto apocalypse has begun

I have been involved in cryptocurrency since 2016. At the beginning as a spot trader, then with a series of jobs in the industry. More recently, very close to the DeFi movement and derivative products. A major turning point for me was the bear market of 2018. Like many out there, I lost quite a bit of my crypto investment in a few weeks. Up to that point, all cryptocurrencies seemed to be on an unstoppable rocket to the moon, with crazy returns. But all came down crumbling in the post ICO era, in a collapse that lasted until mid 2020. I resumed my trading activities then, and it was an excellent entry point, as - once again - the rocket ignited its trajectory to the moon.

Bitcoin went from $6k to $67k. Ethereum from $99 to $3k. Binance’s coin BNB from $15 to $500. And many other unknown coins went from nothing to a fortune in less than 24 months. But as I said earlier, the major turning point of 2018 scares me up to these days. And thankfully so. My perception of an overvalued token or coin is very high. Too high in some cases, so that I miss some growth opportunities when I fear a sudden collapse. But this time around I was blessed by sensing the bear market ahead of the “apocalypse”.

Let’s go by steps. In January 2018, Korean national Do Kwon incorporated Terraform Labs in Singapore. From there, he built an ecosystem based on a token called Luna and its algorithmic stable coin Terra (UST). The former being the speculative asset, and the latter the balancer. Initially the project was extremely successful. Terraform Labs acquired over $1.6B in Bitcoin as a reserve. But last week all came down crumbling when the “stable” coin lost its peg to USD. At the time when I am writing this article, UST is valued $0.54, a stunning 46 per cent lower than its target price of one US dollar. But even more shocking is the down spiral of Terra’s speculative coin LUNA, which collapsed from $85 last week, to 20 cents today. We are not talking about a pair of random alt-coins. UST and LUNA were both among the top 15 most traded tokens on the market. Moreover, as a Layer 1 ecosystem, Terraform Labs offered the infrastructure for other projects to exist. Most of which are experiencing the same type of catastrophic performance. The vacuum created has sucked away $600B from the market, with traders pulling their funds out.

The repercussions on other coins and tokens have been drastic. In a week Bitcoin went down 32 per cent to $26k today. Ethereum is down 38 per cent at $1.8k. Binance's and Ripple’s coins are both down by around 44 per cent. Cardano -53 per cent, Solana -58 per cent, Polkadot -54 per cent, Avalanche -64 per cent, Polygon -55 per cent, and Sushi -58 per cent. The more crypto savvy readers will recognise among those that I have mentioned, that most of them are DeFi projects. In other words, they are not just tokens for the sake of being a token, like Dogecoin which is down 47 per cent in a week anyway. But these projects built entire ecosystems for other tokens to thrive or perish. And perishing seems the direction where most of them are headed right now. Some will disappear. Others will come back up.