The Crypto Panic That Wasn’t

The collapse of the sketchiest project is a sign of health not weakness. [Gilder's Daily Prophecy] May 13, 2022 [UNSUBSCRIBE]( | [ARCHIVES]( >>INCOMING MESSAGE FROM JAMES ALTUCHER [Click here to learn more]( Did you know Coronavirus and inflation could have very little to do with these crazy up and down markets? And the reason your retirement account could go down to zero? I’ve been warning readers about the REAL CAUSE behind this… [I explain everything in my video—you can click the image above to play it…]( [(Watch my short video now, before it’s taken down)]( It’s come to our attention that you might be missing out on extra benefits exclusively for Gilder's Daily Prophecy subscribers. Check out our website where you can find archives, updates, and everything else included in your subscription. You can access it by [clicking here now](. The Crypto Panic That Wasn’t [Jeffrey Tucker]Dear Daily Prophecy Reader, Here we go again. Yes, it gets tedious. Ten years of this. So many obituaries for Bitcoin, by now thousands of them. Each round is more hysterical than the next, simply because the market is so large. Today’s papers are packed with news that is already old news, simply because today the big institutions are moving into Bitcoin and other mainstream tokens very rapidly. Three quick takeaways and then we’ll go into details: - The “stablecoin” TerraUSD had a spectacular crash. It was a sort of bank run, perhaps the first big one on this type of coin. This is a good thing. - The market panicked briefly because this was a high-status product. - Bitcoin and other mainstream tokens took a hit, just as they have in the past. News flash: the sector is volatile. Bitcoin Is Not Immune No question that the whole crypto sector experienced a frothiness in the last two years just as financials have, and hence the downward pressure in the grave aftermath have affected it too. To be sure, crypto is supposed to be a way out of the chaos, so why was it so affected by usual market pressures? Here’s why. In any inflation, the new money chases the most popular products, services, and sectors. If something is hip and happening, the new money will be sucked into that sector first before hitting everything. It could be anything: dot coms in 2000, real estate in 2008, and financials in 2020-21. This is entirely normal. Crypto became the thing of the day and hence became vulnerable to bubble-style economic pressure. There is no sector on the planet that is immune from this force. Money in inflationary times hunts returns and finds the most fashionable place to get them. This is not a bad thing, but rather an overall compliment to Bitcoin and blockchain technologies. It means that tremendous amounts of the smartest money love the sector. They are not wrong for doing so. “The Mainstream Media Is Lying To You!” The media would have you believe that the worst of the supply chain issues are over. But the opposite is true… Behind the scenes, things are getting much, much worse. Bob Biesterfeld, CEO of one of the biggest logistics firms in the world, warns “the pressures on global supply chains have not eased, and we don’t expect them to any time soon.” This is going to impact every American’s life in a potentially major way… And I’m urging everyone I can to prepare now. [To see the #1 move to make before this problem gets any worse, click here now.]( Terra: Luna to Earth Let’s talk about TerraUSA. I hadn’t paid that much attention to this token, simply because I’m suspicious of things that are so fancy that they are almost impossible to explain. Normal stablecoins are backed by normal money, dollar for dollar. TerraUSA always claimed it was governed in a different way: it is run by an “Algorithmic Stablecoin Protocol.” Ok, but you can’t just stick the word “algorithmic” in front of a term and make it legitimate. Already, the alarm bells should go off. The idea was that the stable coin would be tied to a regular token that would be bought and sold in order to maintain a peg. This was a certain method of dispensing with the need for physical dollar back. It’s crypto backed by crypto backed by crypto. Also, they were generating 20% returns for people who bought it. Reading about this scheme reminded me of a perpetuated motion machine. Or perhaps imagine an electric light that shines on a plate of glass that generates solar power to charge the light. What an idea! You can make light and electricity for the whole world forever without any downside. ….oh sure. Another thing that struck me as strange about TerraLuna was the public aggressiveness of its founders. They have been all over Twitter for a long time, attacking critics, brandishing their technological prowess, bragging about how they have changed the world forever by inventing the greatest machine for money and money transfears in history….hmmm. What happened is ridiculously easy to understand. Once confidence was broken, the peg broke and went straight to the floor, and the token along with it. Confidence works until it doesn’t. Anyway, check out the charts! Here is one week of trading. [Terr] And here is a look at the Luna token itself: [Luna] Let me reiterate: this is great! Why? Because it shows that bank runs can happen here. We need more of these! The problem with the regular banking system is precisely that bank runs are not possible anymore. This promotes more bubbles, irresponsibility, and sets the system up for more failure in the long run. The definition of a good monetary and financial system is not an absence of failure but the possibility that failure can happen when stakeholders lose confidence. This is a credit to the markets, not an attack on them. Of course, Janet Yellen at the Treasury didn’t see it that way and immediately pointed to this flopperoo as a reason to massively regulate the stablecoin market. The failure of this token spread throughout the whole sector. It was not a financial contagion but a psychological one. Again, this is a good thing. We need skepticism. We need the freedom to sell and the freedom to drive failure. A free market! The correction to the correction began right away, as many dozens of tokens floated back up following the panic sell orders. Bitcoin had been hit earlier this week but regained losses to $30K as of this writing. Over two years, the strongest token of all is up 250%. That’s a good way to think about this sector and really the only way: look at the long term. Here is your ten-year chart. [10 year chart] Etherium shows a very similar pattern, [Click here to learn more] So have we learned anything from this week’s frenzy? Let us hope so. If you are in these markets, it’s always best to avoid the news frenzy. Volatility is an inherent feature. We learned too that these markets are ever more conventional in the sense that they are going to track regular financials in ways we have observed. That is good and bad for now. Long term, the prediction that they will sustain themselves over the long term is reinforced, and not undermined, by the run on TerraUSD. The collapse of the sketchiest project is a sign of health, not weakness. Rule of thumb: if a token goes up and up mostly due to the sheer obscurity of the protocol and the fame of its founders, there is a good reason to suspect something is off. Add to that a near guarantee of huge returns for those fully invested and you have fertile ground for an epic crash. There will be more epic failures of particular products and companies. And there should be. And yet, the core technology is sound and there are plenty of products out there that are doing it right. Those are the ones to trust. Regards, [Jeffrey Tucker] Jeffrey Tucker P.S. With markets in turmoil, my colleague, Jim Rickards has been extremely busy doing interviews and strategic consulting. But there is something he hasn’t said on TV regarding this crisis. Something he wanted to reserve for newsletter subscribers like you. And it’s extremely urgent. He was able to get a moment on his computer and record this message over Zoom that I’d like you to [watch]( immediately. [Click here right now to watch](. This “Metaverse Mistake” Could Cost You A Fortune [Click here to learn more]( Magazine says it’s “arguably as big a shift as the telephone or the internet.” Which is why the biggest companies in the world are jumping in with both feet. Facebook. Apple. Microsoft. But I’m afraid most folks are making one simple mistake. And if you’re not careful, it could stop you from profiting off the biggest opportunity in the last generation. [Click here to learn how to sidestep this critical error (and what to do instead)]( [Three founders Publishing]( To end your Gilder's Daily Prophecy e-mail subscription and associated external offers sent from Gilder's Daily Prophecy, feel free to [click here](. If you are having trouble receiving your Gilder's Daily Prophecy subscription, you can ensure its arrival in your mailbox by [whitelisting Gilder's Daily Prophecy](. Gilder's Daily Prophecy is committed to protecting and respecting your privacy. Please read [our Privacy Statement.]( For any further comments or concerns please email us at GildersDailyProphecy@threefounderspublishing.com. Nothing in this e-mail should be considered personalized financial advice. 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