The Great Crash of the Crypto World: What Could Happen to My Cryptocurrencies If the Crisis Gets Bigger?

Cryptocurrency trends over the past few weeks have not lived up to expectations and we experienced a never-before-seen drop in major cryptocurrencies and, even worse, the very specific stablecoin Terra (LUNA), thus losing all credibility in this asset.

In past articles, we have already delved into how this became possible and a stablecoin of such prestige as LUNA lost almost all of its value.

Cryptocurrency specialists called this moment one of the brightest in recent years, and in the end it turns out that virtual currencies are ultimately not as stable as once thought. Even with the contingency networks they have, they cannot keep afloat.

• The boom of cryptocurrencies and blockchain
• A break with the world of cryptocurrencies?
• What will happen to my cryptocurrencies if the crisis worsens?
• Coinbase went bankrupt?
• Cryptocurrency arena: Terra case (LUNA)

The boom of cryptocurrencies and blockchain

In recent years, the popularity and value of cryptocurrencies has skyrocketed, perhaps too much. Last year, The cryptocurrency market has grown to over $3 trillion (more than four times what it was in 2020).according to Time magazine.

And the fact is that these assets, which appeared with the debut of bitcoin in 2008, are aimed at creating a financial system free from oversight by governments and large banks, which at first attracted most of us.

Now, as far as we know, there are over 12,000 cryptocurrencies and the blockchain, on the other hand, is used to keep track of everythingfrom foodborne disease outbreaks to tracking supply chains and documenting the sale of NFTs.

A break with the world of cryptocurrencies?

Now, not all that glitters is gold, and we may find ourselves in the worst hours of this digital asset. Let’s see if it comes back. And this is what some analysts and experts believe. This cryptocurrency frenzy is absurd and these people can really face the fact that all their savings will be compromised.

This idea of ​​the depoliticization of money and that it is born apart from states, and that it is they who invade the private sphere when they interfere in the system, raises two problems: on the one hand, money did not emerge from barter systems. between people. Money was and is a product of the state.

Second, central banks did not come into being to usurp private sector control of money. Yes, it is true that they are not the best example of the custodians of our savings, but without them, money would be subject to the “naked” control of the politics of the country.

Yanis Varoufakis, former Greek finance minister and expert economist, says that the idea that a society can survive without a state or other entity that can create and destroy money depending on prevailing economic conditions is ahistorical and impractical.

Now these exchanges are trusted by almost everyone who uses the crypt. In theory, you can manage all of your keys and transactions, but in practice, it’s a complex, error-prone, and high-risk business. To this we add that we are talking about centralized exchanges in their vast majority, so release 0.

The problem arises now that things are starting to unravel.

What will happen to my cryptocurrencies if the crisis worsens?

A lot of exchanges died and everything disappeared with them. Let’s not even talk about when we “pull the blanket” and find some kind of pyramid scheme.

Adam J. Levitin, professor of bankruptcy, business law, and financial regulation, puts it very simply. You, When depositing on an exchange, it is a sale, not a deposit per se, and the percentage withheld is for the exchange, not for you.

In the event of bankruptcy, a debt will be created in which you will be a part as a creditor. The problem arises when the administration of this exchange is responsible for matching you based on their settlement preferences.

Secured creditors (funds, investors and financial institutions) will be the first to receive all property. Once covered (difficult task), the balance is distributed to unsecured creditors. Here you and all your friends.

But let’s say you happen to get all or part of this when the bankruptcy is finalized: your assets will be frozen until such termination occurs. And if the cryptocurrency exchange turns out to be not very interested in speeding up the process, bypassing all sorts of regulations, you may have to wait a long time.

And even if you get paid, it will be the dollar value of your assets on the eve of the crash. If your coins double in value in the years it may take to unravel such a complex bankruptcy, your pro rata will be based on their value at the time of the stock market crash.

And wait, the worst is yet to come. If the exchange goes bankrupt, it can legally recover many of the amounts withdrawn by its depositors in the 90 days prior to the bankruptcy.. So be very careful with withdrawing money in circumstances like this, or let’s hope it lasts at least another 3 months.

The current bank saver protections that we all know were put in place after terrible crises like the one in 1930, 1973 or even 2008 that wiped out a lot of lives and these types of exchanges seem to be oblivious.

Coinbase went bankrupt?

Coinbase, the largest cryptocurrency exchange in the US, announced quarterly loss of $430 million and a 19% drop in monthly users.

In the event that this cryptocurrency exchange goes bankrupt, Coinbase itself claims that its users can also lose all cryptocurrencies stored in their accounts.. This exchange, let’s remember, is the one who ultimately controls user access to these assets.

There is a huge amount at stake. To give us a rough idea, according to the dossier, he was guarding $256 billion of his clients’ money on March 31st.

1/ There is some noise due to the disclosure we made today in our 10th quarter about how we own crypto assets. In short, your Coinbase funds are as safe as ever.

— Brian Armstrong — barmstrong.eth (@brian_armstrong) May 11, 2022

CEO Brian Armstrong quickly explained on Twitter.as you can see above, saying that the company is not in danger of bankruptcy and that user funds are safe.

If we save, already using Coinbase as an example, the aforementioned secured lenders, he has $2 billion in bonds and countless lawyers and investors of all kinds who are working together to avoid this bankruptcy, So, if that happens, imagine when you can get your money back, if at all.

Cryptocurrency arena: Terra case (LUNA)

A few days ago, after the catastrophe that happened to this stablecoin, we received another piece of news: the network that supports the LUNA and UST cryptocurrencies announced that it was paralyzing operations, and users reported that the coins disappeared from their virtual wallets.

Binance and Bitrue, the two largest exchanges in the world, immediately announced this and announced that buying and selling of LUNA and UST was paralyzed.

At the same time, social networks were filled with complaints about the disappearance of their cryptocurrencies. At that moment, the value of this, which had not ceased to fall, went straight to zero, losing all its value.

4 days ago and don’t panic, the cryptocurrency reappeared in the wallets of its users. We leave the Binance announcement to you. “Make sure you do your own research on LUNA and UST fundamentals before you trade.”add to message.

And this may just be the start of something bigger that may or may not happen, who knows. Its volatility is an undeniable fact, and even real doubts are starting to arise as to whether we are in a Ponzi scheme. All this will continue until the hype subsides or the bubble bursts.

Perhaps with good management and years of improvement it is possible to reach the sweet spot and avoid these types of problems. It may also be that the future is not with this type of exchange.. Let’s remember that cryptocurrencies are born free and do not obey organizations, and they are centralized.

The big problem with decentralized ones is their complex and almost expert need for economic knowledge, so the solution could be here: simplify them or educate the population.