now it's exactly a week since one of the
biggest supposedly most stable
cryptocurrencies took a massive tumble
it's still down since then and the Crash
sent shockwaves throughout the community
of users one popular token Terra Luna
lost 99 of its value from a high of 118
to just nine cents spooking investors
and sending cryptocurrency markets
plummeting the entire crypto markets now
reportedly worth just over a trillion
dollars just a third of its value six
months ago it all started just 12 years
ago in 2010 one Bitcoin the first
cryptocurrency was worth less than one
US Cent at its height last year it hit
68 000 latest estimates say there are
more than 300 million crypto users
worldwide attracted by the lack of
Regulation and huge potential rewards
all Investments go up and down so does
the Terra Luna signal the bursting of
the crypto bubble or just a normal
Readjustment I'm joined Now by David
Gerrard who's a cryptocurrency
journalist and author thank you so much
David for joining us I'm sure you just
heard those questions I mean is this
just a bubble that's finally burst
so we've had crypto bubbles before 2013
and 2017.
um and what tends to happen was they
clearly hit their High and the party was
clearly ending but they took about six
months to a year to deflate so I think
we're in the sort of deflating stage at
the moment I think the bubble really
fell down around mid last year as when
retail dollars mums and dads and
ordinary people looking to get ahead
when they got out of it and ever since
then it's sort of the industry has been
frantically trying to recruit new
customers doing ads at the Super Bowl
and so on
it's a bit frantic trying to lure people
in
so the UST collapse last week
I mean that sort of collapse happens all
the time in the shankier reaches of the
crypto economy but it's really put The
Frighteners on people so there's been a
definite loss of confidence yeah and
just help our audiences understand why
those users uh you know stepped away and
pulled out
so
UST pretended to be a stable coin worth
one dollar exactly you know so it didn't
go up and down like Bitcoin
but what it really was was UST was a
token that was priced in another token
that token was priced in ether the
currency of ethereum and that was maybe
priced in dollars so it was a really
long chain of Leverage
we've seen that before this is like a
very mini version of the 2008 financial
crisis when you had money market funds
with hugely over leveraged things they
said were dollars but were really bets
on bets on house prices
essentially a Ponzi scheme then the way
you're describing it
it does work in the way that early
investors can only be paid with dollars
from later investors when you're talking
about the actual dollars
um I if I would wouldn't call it a Ponzi
because that would be ascribing intent
but it works the same way
I mean and and we all know that
that's famous one is is Bitcoin
um but but it's a crowded Market of
cryptocurrencies just tell us about some
of some of the main ones
well this Bitcoin and ethereum and the
main ones you can trade for actual money
there's a lot of other coins that are
derivatives of those or derivatives of
derivatives
UST was one of those hugely over
leveraged
it they said it had a value of 18
billion dollars but that was imaginary
money
this crypto market cap of trillions or
hundreds of billions those are made up
numbers virtual numbers that money never
existed actual dollars are a lot scarcer
as a piece of Finance it's a very small
Market but when a number is going up
it's in the headlines as
there's no million Bitcoins there can
only ever be 21 million Bitcoins but
anyone can make their own magical
internet money and thousands of people
have
UST was one of these you know a magical
internet money you just make it up one
day say it's got a price tag and say
it's worth a dollar and then you've got
countries like Venezuela El Salvador
very much trading in in Bitcoin uh as as
one of their main currencies when you
see a crash like this I mean how
devastating is it for them
well oh Bitcoin and El Salvador has been
a disastrous failure essentially 200
million dollars that they couldn't spare
has gone up in smoke it's quite bad and
the country is now in a lot of trouble
they use the dollar as their currency so
they can't just print more currency
they've got to pay all their bills and
balance their budgets every year it's a
real problem for them because the
international markets are calling and
they want their bonds paid
so do you now have a situation where
sure a lot of wealthy people made a lot
of money but then you also have this Gap
with Ordinary People essentially trying
to get rich quick and and now you have a
situation where this is crashing and the
risk is very much being exposed
very much so now you can totally make
money in crypto but it's a zero-sum
trading environment it's very rough very
unregulated you may lose your shirt and
no one can make money in crypto unless
the money comes from someone who lost it
so it tends to go to the big guys from
the mums the dads the grannies the young
people who are desperate and looking for
a way out of their situation
it's really worrying there needs to be
more investor protection on this stuff
yeah and that's the point that I wanted
to just pick on the fact that there is
really no government regulation I mean
depending on which country
there's a few regulated exchanges that
are well behaved but the vast majority
of crypto trading happens in unregulated
offshore casinos where there is
literally no rules except what they can
get away with and not lose customers
yeah so here we are in this visual
vicious sort of financial
um uh year um for financial markets and
and it's would you say being
particularly devastating in the crypto
world
it's basically when the stock exchange
sneezes crypto catches a cold
so
crypto doesn't influence the stock
markets but the stock market has
influenced crypto so when the NASDAQ
went down a week before UST went down
Bitcoin lost about 10 that sort of thing
David thank you so much for helping me
and our audiences better understand that
world