The collapse of the TerraUSD and Luna digital currencies and the loss of millions of their money.
Perhaps this is the most appropriate address for the crisis that is taking place this day in the digital currency market, which caused considerable losses to millions of traders in digital currencies in the world and made some of them think of suicide. In the second week of May, which we are in, a massacre took place in the currency market. Digital has caused traders to lose more than 200 billion dollars of their wealth in one day, but some people have become millionaires at night. When they wake up in the morning they find themselves bankrupt or in debt, the price of which has fallen from more than 100 dollars to nothing. Digital currencies have the last days, and this made everyone ask a straightforward question,
 |
| The collapse of the TerraUSD and Luna digital currencies and the loss of millions of their money |
And this question, by the way, is also being asked by the traders in digital currencies themselves, many of whom until now do not understand what is happening and do not know how to act, especially when we come to talk about the most famous currency of the day, which is the color, which lost almost all its value in a matter of days, and its sister, the stable currency, which is no longer stable, the TerraUSD As usual, in shocks like this, some people are upset about their situation and drowned in their grief over their losses, and other people see this collapse as an opportunity to enter, for example, many people think that they are buying the ill-fated currency called Luna, which has become literally free, and I am almost sure that 99% of what They want to buy this currency, they have no idea why it collapsed in the first place. Everyone notices that the number of this currency is increasing every day, but no one knows how and why?
- What exactly is happening? In the digital currency market?
- What is the story of Luna and her sister Tira, who are molding the market?
- Are these currencies the price will rise again?
- Is this a good time to buy? This is a sample of the questions that we will chat about with each other
In the last two years, and specifically starting from the second half of the year 2020, many people began to put their money in the digital currency market as a means to develop their capital in light of the decline in economic activity in a way Generally, during this period, many circumstances and factors have led. They are still driving people in this direction. This means inflation on the one hand is increasing, money is decreasing in value, natural economic activity is declining, and traditional investment tools are performing well. All this has made many people think they are trying their luck in the digital currencies they hear from the media and social media. It is possible to achieve wealth for its owner, according to triple-A company data, as there are more than 300 million people in the world who put their money in digital currencies, and this is as of 2021. Of the 300 million people are countries, a significant part of them are from Arab countries, so when we come to look at the map of traders in digital currencies we have in the Arab countries,
 |
| The collapse of the TerraUSD and Luna digital currencies and the loss of millions of their money |
1. the Egyptians are in the lead with 1.791 million traders,
2. the Moroccans with 878 thousand traders,
3. the Saudis with 452 thousand traders,
4. the Iraqis with 375 thousand traders
5. the Yemenis come with 278 thousand traders,
6. the Syrians with 178 thousand traders,
7. the Emiratis with 152 thousand traders,
8. the Jordanians with 129 thousand traders,
9. the Tunisians with 123 thousand traders,
10. the Sudanese with 102 thousand traders in digital currencies
The common thing between all these people is their desire there is a big and fast profit, and this goal has people who really succeed in achieving it, there are more people who fail and lose everything behind them and what is in front of them, including their health, and here there is a very important question that we must ask,
 |
| The collapse of the TerraUSD and Luna digital currencies and the loss of millions of their money |
Who wins in this market, and how does he win? And who loses it loses why?
If you asked this question to one of the groups who achieved good results in digital currencies, he might tell you that I won because I know how to choose the correct currencies, currencies that have a project and a future and such talk, while the one who lost because he chose failed or weak currencies. This talk appears logical at first glance. But in fact, it remains empty talk when you try to compare it with what is happening on the ground in the digital currency market, and the evidence is that you can find two people who put their money in the same currency, for example, Bitcoin, but one of them loses and the other gains, so how does this happen?
In short, profit and loss in the digital currency market depend greatly on the timing, I mean the timing of entry and exit, and let me give you an.
for Example.
Suppose that I bought this day Bitcoin for 30 thousand dollars per pill, in the expression of our Saudi brothers. The next morning it became $40,000 I sold it from her and sold it at this price and won another one who bought it at the same moment for 40 thousand dollars and expected that its price would continue to increase during the coming days, but this did not happen and the price took a dive again and the bitcoin remained at 25 thousand dollars at this moment. We both put our money in the same currency, but I won and he lost, because I was more fortunate than him at the timing of entry and exit, and here, by the way, I mean to use the word luck because the digital currency market, in particular, is based in large part on luck. We analyze it and look forward to the future, such as the stock market, for example, and this is the secret of the severe fluctuations that characterize the price movement in this market. On May 1, 2022, Bitcoin achieved $38,471, and for the half-month on May 15, Bitcoin achieved $29,980.which means it lost approximately 22% of its value within two weeks, some people see that this is the end of Bitcoin, and other people see that this is just a failure and its price will rise again, but no one can confirm any possibility of the two, and the price of Bitcoin exceeds $50,000 within an hour. One of my times is that it will drop to $20,000. This is the nature of this market in the digital currency market in general. The rise and fall of the price of any currency by more than 20% in the blink of an eye are easier than a drink of water. These extreme fluctuations in prices throughout their lives have been a barrier standing in the way of the expansion of the digital currency market and its spread among a larger number of people,
 |
| The collapse of the TerraUSD and Luna digital currencies and the loss of millions of their money |
What are the Stablecoins:-
And from here a method of Exchange cryptocurrency called stablecoins or stable currencies appeared in the market. In short, these are cryptocurrencies that have a fixed value and are linked to reserve assets that support their value, such as the US dollar. These currencies can be considered as a bridge between regular cryptocurrencies such as Bitcoin and traditional currencies such as the dollar, the value of this currency is fixed, which is often 1 US dollar, which makes it a means of buying and selling in the digital currency market.
For example
I have 10,000 dollars with me and I put them in cryptocurrency I am afraid of their value if the currency price drops at any moment so I would sell them for any of the stable currencies in the market, and I almost guarantee that the $10,000 I know will not be transferred because this currency has a fixed value of $1. At the same time, I kept my money inside the system of digital currencies without having to deal with traditional banks.
These stable currencies. Have two basic types.
Types of stable currencies:-
- first is the Collateralized Stablecoins or the guaranteed stable.
Currencies are currencies guaranteed with assets and reserves equal to or exceeding their value, such as the Tether currency, which is equivalent to $ 1 and backed by reserves of the US dollar, meaning if we assume that there are 80 billion copies of Tether that are traded in Today, the digital currency market must have reserves worth 80 billion US dollars under the hands of the company issuing this currency in order to be able to maintain the stability of the price of 1 Tether at 1 dollar. The stability comes from the fact that the currency is covered by reserves of real assets equivalent to its value, whether in the form of deposits in Bank accounts, treasury bonds, or others. The same idea of linking the dollar to gold in the past. This is the first type.
- Algorithmic Stablecoins:-
There is another type of digital currency that is not covered or guaranteed in need, and this type its name is Algorithmic Stablecoins or Arithmetic Stable Coins, these are currencies that, according to the developers’ words, are supposed to be powered by an algorithm or a computational mechanism that guarantees that their price is preferably fixed at one dollar without having any guarantees for them.
- How does this happen?
without any pure economic logic, I will explain to you how. Let
For example.
- TerraUSD is supposed to be a stable currency with a fixed price of $1, and
- Luna is a digital currency. Normal, its price rises and falls according to supply and demand, just like any digital currency in the market, whether it is Bitcoin, Dogecoin, or others. The important.
The question is now for Captain Kwon, where will you guarantee, O Pride of Korea, that the price of TerraUSD will be fixed at $1 without any assets that include or support it? Worth? I mean, if people got up early in the morning and decided to sell their teas, where would you get their money from?
 |
| The collapse of the TerraUSD and Luna digital currencies and the loss of millions of their money |
Kwon actually had a genius answer.
He told you that we will ensure the stability of the TerraUSD through an algorithm based on the idea of arbitrage or arbitrage, in which we will link the Terra to its sister Luna. Focus with me on these next few seconds to understand how this algorithm works, because it will make you puzzled by many puzzles that happen in the market today. This idea of the algorithm is simply based on the unlimited transferability between the tera USD, whose price is equivalent to 1 dollar, and the color, whose price changes according to supply and demand. I mean, if we assume that the price of the color currency today is 20 cents, then you as a holder can sell 5 of them for 1TerraUSD. And vice versa, if you have 1 TB, you can buy 5 colors. This is based on the fixed price of the Terra at $1. Well, if the price of the terra went from $1 to 95 cents, for example, how would it return to its value, which is supposed to be fixed at $1? Here comes the idea of arbitrage. As a trader, the first time I noticed that TerraUSD was trading at a price less than the dollar, I went to buy it at this low price and took it to buy a particular color with it. So why do I buy a color with it in particular?
Because for a Luna terra, it is equivalent to 1 US dollar, even if the actual price of a terra is 10 cents. Therefore, if I have a thousand TerraUSD and the price of a Luna in the market is $2, I can buy 500 Luna for a thousand terras, and I almost earned an immediate profit, because a thousand terras that I bought each for 95 For example, I paid only 950 dollars for them and bought 500 colors with them, which are worth 1000 dollars. So there is a gain of 50 dollars.
Someone will tell me, what does this have to do with the stability of the Terra?
I mean, how this move guarantee that the price of the tera will return to 1 US dollar again?
in short, the 1000 terabytes of USD that you went to buy with. They burn as soon as the purchase process is completed. I mean, they are no longer present, and they are left outside the trading circle. New colors appear in the market and old teras disappear. This means that the number of available terms in the market has decreased movement. This is when you and I do it. The number of terras decreases more, and therefore its price increases until it returns again to 1 US dollar. But at the same time, the number of colors in circulation increases, and their price decreases. Therefore, whoever has terras will get out of it and go to buy a new color that will be created for the first time. The number of colors circulating in the market increases more, and its price decreases. Other people with terras worry about the low price of the color, so they sell the terra and go out, as the number of colors increases and its price decreases. We prefer this in a loop or spiral that they call Death Spiral or The death spiral, and this is exactly what happened with Luna and Terra a few days ago,
A company that developed the currency created a decentralized lending platform called Anchor Protocol to supply the demand for TerraUSD. The idea of the platform is that it offers rates of Interest to reach 19.5% for investors who buy TerraUSD and keep it there. On May 6, the Anchor Protocol of the Terra had deposits equivalent to $14 billion. Suddenly, large amounts of these deposits began to be withdrawn, and this coincided with the US Federal Reserve raising interest rates within 3 days. However, specifically by May 9, the volume of deposits in the Anchor Protocol decreased by more than 5 billion dollars and reached 8.7 billion dollars, but this decline created a shock in the market and a large wave of withdrawal from the term began, and this put more pressure on the color that is available from it increased in the market and its price collapsed because The link between the two currencies is practically collapsing. The price of TerraUSD has declined from $1 at the beginning of the month to approximately 17 cents. anyone who carried his money in this currency on the basis that it is a stable currency whose value is fixed at $1 On the contrary, his house, and his currency were ruined, due to the large exodus Of the TerraUSD, the number available in the trading circle increased and reached nearly 7 trillion copies And after its trading price in April 2022, it reached $116, with a final value equivalent to $0.0002. This happened because the two currencies, whether the TerraUSD or Luna, do not have real assets that support them. They both come from the air. In theory, the TerraUSD, in order to get out, must look at the body of the Luna. That is why the group who consult their minds enter the Luna because of the collapse of its price. I advise them to think deeply 6 times before they land. Your money is in it, the important thing is that the loss that Tira and its sister Luna lost shook the market rigidly and put pressure on other stable currencies like Tether, which fell to 95 cents before it bounced.
