The collapse of Terra Luna and stablecoin TerraUSD is more serious than a Black Swan of the Crypto market
Have you ever seen a black swan? Definitely not because it’s so rare that everyone doesn’t believe that black swans exist. That is why Black Swan has been used as a word to refer to extremely rare, unpredictable events that have a serious impact in the financial markets.
The recent collapse of Terra Luna can also be considered as one of the biggest Black Swan events of the Crypto market. Because of the factors that are extremely rare, unpredictable and have a serious impact on the entire Crypto market.
No one would have thought that a stablecoin would drop below $1. Or a top cryptocurrency that is trusted by many investors can drop from a price of more than 100 USD to only 0.0001 USD, which is about 1 million times divided. That is, if you invest 1 billion VND in Luna, now there is only 1,000 VND left.
What is a black swan?
As mentioned above, black swans are very rare and no one believes they exist. But the fact is that black swans have been found in Australia. Later, the term Black Swan was popularized by the author, finance professor Nassim Nicholas Taleb, to refer to random occurrences that are almost impossible to predict, but have serious impact.
Nassim Nicholas Taleb describes the three main elements of a Black Swan event as:
1. Exceeding the normal expectation, very rarely happens, not even the possibility of it happening.
2. There are dire consequences when it happens.
3. To be interpreted as an event that could have been predicted after it had occurred.
The biggest Black Swan events in the history of world financial markets
The most famous and severe Black Swan event in the history of the world financial markets was the collapse of the Lehman Brothers banking system and the US housing market in 2008. The global financial crisis was over. proved to be catastrophic and had an impact on stock markets around the world for many years. Europe’s economy has struggled to regain the stability and growth it enjoyed before 2008.
That same year, we saw the most severe case of hyperinflation in world history in Zimbabwe. Inflation is at its worst, inflation in this impoverished country has exceeded 79.6 billion percent. The country’s finances were severely damaged, although no one could have predicted this devastating and hyperinflation would happen before that.
Before that, the dot-com bubble of 2001 could also be seen as a serious Black Swan event, which shook the stock market and the US economy. Until the fall was unpredictable and unmanageable, the Americans suffered heavy losses from this event.
Or most recently, the outbreak of the Covid-19 epidemic, which also caused the stock market and even Crypto to wobble. No one could have predicted that such events would occur and have dire consequences.
Terra Luna’s demise is more serious than a Black Swan event
Black swan events in financial and economic history have had dire consequences. However, this is not the end, but after that, the market recovered positively. But the collapse of Terra Luna and stablecoin TerraUSD has consequences far more severe than a Black Swan event and may not be remedied.
The stablecoin TerraUSD has a mission to maintain a stable price of 1 USD. Since its launch in 2020, TerraUSD still does its job well and rarely deviates from this $1 price point. That makes TerraUSD and stablecoins a “stable island” for investors during storms, without fear of assets falling when the market goes down.
However, recently, TerraUSD has dropped to the lowest level of only 0.23 USD. The drop cost investors billions of dollars. Even today’s most popular stablecoin, Tether (USDT), dropped to $0.97.
Cryptocurrency companies have been trying to convince Congress that stablecoins are a safe place for investors to put their money, the best intermediary to trade cryptocurrencies. But the collapse of TerraUSD has shaken that assumption, causing investors to fear that there is no safe place in the crypto market.
The collapse of Luna and TerraUSD not only caused investors to lose all their money, caused the price of Bitcoin to drop, the crypto market plummeted, but also cast a dark cloud over the future of this market. dark.
at Blogtuan.info – Source: cafebiz.vn – Read the original article here
