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The Worst Crypto Collapse in History - YouTube
Channel: Max Maher
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I've slept about five hours in the last
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two days and haven't showered so
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apologize for that but I felt the need
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to talk about Luna and especially the
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UST collapse what happened how I
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personally incurred crazy losses and the
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rumors swirling around that this is some
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kind of intentional Market manipulation
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and also I have an announcement to make
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at the end of this video so stick around
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the this event has ruined
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tons of people's lives and
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undoubtedly hurt the entire crypto
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market and you'll see what I mean in a
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minute
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I I really don't even want to be
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recording this video so let me just give
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you let me just give you the the
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essentials first so UST it's a stable
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coin it's supposed to be pegged to the
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US dollar this happens through Arbitrage
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trading where investors essentially
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trade UST for Luna or vice versa to keep
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that price right at one dollar now
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typically this works it's had a few slip
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UPS in the past but nothing it hasn't
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recovered from every time there's been a
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slip up it's been been because you know
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the market tanks or something like that
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but these things are made to withhold
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Market events so typically it's fine
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well as you're aware I'm sure
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UST is now trading at far less than a
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dollar around 50 cents at the time of
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this recording and it's been as low as
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29 cents now the worst part is that
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people buy and invest in UST and other
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stable coins as a bit of a shelter from
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volatility and risk you park your money
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there when you're trying to be safe like
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it's supposed to be the safe option
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the best way to visualize this is like
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extreme inflation which real inflation
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is pretty bad today also but inflation
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that doubles overnight so coffee was
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three dollars yesterday well it's six
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dollars today and there's a chance it
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could be twelve dollars tomorrow this is
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essentially what happened to every
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single UST holder and there's millions
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of holders this is huge so what caused
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all this well at the beginning of the
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month uh anchor protocol which
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was the most popular lending platform on
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the planet switched their rate structure
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here you could lend out the UST
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stablecoin token for around 20 apy crazy
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rates the problem is that this was more
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of an introductory rate to get people in
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and you know build up excitement around
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this ecosystem rates would be lowered
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later they were burning a ton of cash
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and this couldn't go on forever which is
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totally fine if cash ran out rates would
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just drop but your deposit would would
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have no issues whatsoever well the
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beginning of May a new rate structure
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was enacted that would make rates more
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variable depending on demand within that
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protocol rates were expected to lower by
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about 1.5 percent per month for a few
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months until that stability was found
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and then they weren't burning so much
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cash so this started and the expectation
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was that people who had money deposited
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on this anchor protocol earning interest
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would leave some people would and
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and the exchange would be spending less
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money well the opposite happened
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deposits hit a record high in early May
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after that switch to around 18 billion
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dollars but again this wasn't the end of
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the world I personally kept an eye on it
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but I wasn't exactly worried about this
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because again the money runs out it's
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fine however we're in a touchy market
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right now stocks are going down cryptos
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everything there's a ton of fear on
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everything everything having to do with
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investing people in the General market
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began to sell cryptos including the one
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that backs UST Luna the decrease in
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Luna's price caused investors to be
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concerned about its ability to back the
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value of this now massive UST token it's
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a top 10 token now some investors began
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selling their UST and this caused a ton
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of downward pressure on UST because
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algorithmic it can go down in value this
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took it off of that one dollar Peg so it
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went from one dollar and around May 7 to
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around 99 cents again this wasn't the
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end of the world stable coins flux
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weight even usdt fluctuates a little bit
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just recently UST was trading at a
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dollar oh one no one better than I it
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was totally fine so things were a little
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bit touchy but so was the entire market
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so this didn't seem like that big of an
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issue really that is until Monday when
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the FED announced the interest rate hike
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and this caused stocks and cryptos to
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Tumble dramatically and almost instantly
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people worried about further losses in
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the market began selling including the
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Luna token and UST so this caused a kind
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of negative flywheel where Luna's price
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decreases further and remember Luna is
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backing UST so people get even more
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worried that the value behind this
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stablecoin is crumbling this means even
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more sell-offs happening and you can see
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this kind of negative effect happens
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because of these sell-offs UST Falls
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further off of its one dollar Peg
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selling off more and more because now
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people are freaking out you know it hits
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98 cents people like I'm done with this
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and you can see that negative effect
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compounding we can see the market cap of
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UST dropping dramatically right at this
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time this is where prices begin to
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absolutely free fall and I'm not going
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to lie this was a very Panic inducing
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time I saw this happen live I was on the
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chart for Luna and UST I saw Luna live
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drop by 50 in what felt like minutes I
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watched the price for UST which is
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supposed to be a dollar dropped down to
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80 cents and then 70 and then 60. and
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there's nothing I could do about my
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deposits at this point the network was
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congested by the time I could get any
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money onto an exchange this thing could
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hit zero evaporating my account anyone
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who was using leverage was very likely
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liquidated especially by this point if
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you had even 10 leverage it's not
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looking good and that's a lot of people
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but what's especially frustrating for me
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before I ever bought a single dollar of
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UST personally I did an insane amount of
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diligence to determine if this risk
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reward made sense I understood the
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tokenomics and the key risk factors I'm
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Diversified I even chatted with three
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different crypto lending hedge funds to
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look at their risk analysis to like see
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if this actually makes sense for me I
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really like to do the research before I
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buy anything the consensus seem to be
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that UST would be totally fine as long
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as Luna doesn't drop more than about
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like 70 percent which seemed like a
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reasonable margin to error margin of
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error to me well guess what happens Luna
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drops 70 percent and then some
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surprisingly it didn't go to zero the
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first night but I was still looking at
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larger losses than I've personally ever
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seen before this was money I'd sitting
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on the sidelines waiting for good deals
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while the market was just being crazy I
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was trying to be relatively safe with it
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so I keep my money in not wanting to you
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know be the guy who sells a dollar for
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50 cents because you know that sounds
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ridiculous who would do that
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and uh and I know that's perfectly
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possible for the price to go back up to
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one dollar I mean with an understanding
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of how this price goes back to a dollar
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I even decided to try some Arbitrage I
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should be able to essentially buy UST
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for 70 cents or whatever it's at and
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then sell it to Tara for a dollar in an
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instant 30 profit whatever that
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difference might be this was a major
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problem though because they have a
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safety mechanism that makes it less
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profitable to do Arbitrage the more that
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it's being done so it creates this kind
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of like cool down period within the
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system now in normal times this this is
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pretty useful but right now this means
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my one dollar tokens are stuck at far
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less than one dollar for the foreseeable
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future meanwhile the backing Luna is
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getting pummeled increasing the risk
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more and more as the price of living
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goes down this risk goes up plus that
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cooldown period just isn't happening
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fast enough this is insanely bad like
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the crypto version of the housing bubble
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so the next day comes and I know that
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we're completely walking on eggshells
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here if the crypto Market drops further
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we're screwed absolutely a total bank
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run but if we can be calm prices will go
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back up to a dollar maybe in a few days
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maybe a week at most so I monitor the
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market and sell a little bit at like 90
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cents but things seem to be healing up
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so the plan was just hang tight just a
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little while longer just see where
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things Trend that was a mistake
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late on the 10th prices began to tank
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further and further hitting eventually
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around 20 cents for UST a dollar now
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worth 20 cents so thankfully I didn't
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Panic sell during that time but I do
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have sales around 50 cents on a dollar
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they would do that against me by far the
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most painful sales of my entire life so
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not only am I part of one of the worst
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events Black Swan events to happen in
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crypto but now I'm thinking about how I
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I feel obligated to be transparent and
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talk about it like someone has to talk
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about these events
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and you know thinking about this
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if I bought a volatile asset and it
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dropped 50 sure I'd be salty about it
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but I think to myself like well you know
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that's the risk you take buying a
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volatile asset but when you buy
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something that's supposed to be the safe
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bet you know reasonably safe anyways
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it's not perfectly safe you just feel
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betrayed when it drops and I'm sure
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there's a lot of people who kind of feel
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the same way as I do about this you feel
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dumb you think that you could have done
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something different you think you should
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have done something different but the
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more I think about it I really don't
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think anyone who's lost on UST should
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feel like they did especially anything
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like that wrong I mean this is the
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definition of a Black Swan event this is
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the Lehman Brothers collapse of crypto
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it's not just degenerates who were part
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of this it's not hundred thousand
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percent apy yes it's a high apy don't
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get me wrong like it's a hint of
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degenerate for sure but we're talking
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hedge funds were in this retirement
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savings there was a lot of smart people
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who would invest in this who got
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absolutely smashed
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every single person invested
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just didn't properly calculate risk
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myself included and that's the mistake
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that we made and for those saying you
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know this is 20 it's unsustainable what
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do you expect you're absolutely right
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but so are lending rates on literally
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every single crypto platform every
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exchange that pays eight to twelve
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percent flat interest on stable coins is
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losing money in order to get people in
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the door this is no different no one
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would expect an 18 billion dollars to
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just essentially evaporate in two days
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and that's what happened now I'm going
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to talk about
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uh the few what the future may hold here
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but first I want to talk about the
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rumors that this may be a coordinated
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attack now we don't have proof on this
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but I think it's important to understand
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you know what's being said anyways so
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marketing conditions market conditions
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absolutely amplify this entire issue but
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there are rumors that it might have been
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spurred by BlackRock and Citadel they
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borrowed a hundred thousand Bitcoin from
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Gemini and The Story Goes that they then
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swap 25 of that into UST they then
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reached out to do Quan the founder of
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Terra saying that they wanted to buy a
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large chunk of UST and would sell
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Bitcoin at a discount in order to do so
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and they want to do it directly so they
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didn't hurt UST too much supposedly he
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took he took the bait lowering the
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supply of available UST again this has
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not been confirmed BlackRock and Citadel
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then sold all the Bitcoin and UST that
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they held causing both markets to fall
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sharply at the same time creating this
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Panic or at least amplifying a panic
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that was happening once price decreased
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they then buy back their Bitcoin that
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they loaned out at a lower price and
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make a tidy profit on the loan now the
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unfortunate thing is that if this is
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true it's totally legal they were simply
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exploiting a market that had a major
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weakness it's extremely unfortunate but
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it's a weak market like there's not much
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you can say or do some people did call
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that this could happen and I even did to
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a certain degree but we shouldn't be too
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hard on ourselves because if you look
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hard enough you will literally find a
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prediction for anything so so what now
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there's two major concerns that I want
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to point out and then my announcement
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Tara is voting to tweak the algorithm of
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UST to get the one dollar Peg algorithm
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to work faster getting the price back to
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normal sooner this is good but the issue
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here is that it'll be at the expense of
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Luna it will cause a lot of downwards
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pressure and even given this change I
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foresee a ton of volatility in UST
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before it gets fixed if it can even get
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fixed the stress is not over if you
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still hold UST in my opinion none of
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this is financial advice of course now
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second this is extremely bad for the
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entire crypto Market both crypto lending
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and stable coins have had a a close eye
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from Regulators for the last year or so
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I'm willing to bet that this is the nail
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in the coffin for both this event is
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exactly why markets get regulated look
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at the bank runs of 1907. black
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Wednesday the 08 crisis all of these
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things people have their fund they make
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their money markets get hot and
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eventually the Music Stops then
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Regulators need to come in and try to
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prevent it from happening again but then
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there always will be a new market that
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crops up and the exact same thing
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happens
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and we saw this coming I highly
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recommend watching my last two videos
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after this one is about governments
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attempting to replace Bitcoin and stable
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coins and the reasons to do so and the
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other is about how the anchor protocol
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is dying off like I couldn't have I
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didn't plan it but like those two videos
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somehow landed perfectly
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unfortunately the only thing that we can
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do now is learn from this so personally
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I've learned that I'll diversify even
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further I thought in eight percent
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allocation of this was you know risk I
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was willing to take and I learned that
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even that can be too much now I did want
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to do something because I know the
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community is hurting like I am honestly
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um bitget and FTX sponsor me so I'm
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going to give that money to the
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uh I just that's all I can really do at
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this point it's a sad it's a sad day for
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crypto and we just need to stick
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together so thanks everyone
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