Joshua Henslee released a new video talking about one of the most dramatic events in the digital currency industry in recent times: the collapse of the UST stablecoin. Find out Henslee’s thoughts on what happened and what it means in the video below.
A dramatic price crash in digital currencies— what happened?
Henslee opens by noting that, overnight, digital currency prices cratered. The blame is being laid at the feet of the UST stablecoin, which lost its peg, causing the project’s backers to sell vast quantities of BTC (which they hold in reserve) to try to save it.
“It’s just a Ponzi scheme,” Henslee says. He believes that this is a big deal given the size of UST, which has a $15 billion market cap. At the worst point, UST went down to 65 cents when it’s supposed to be pegged to the USD, causing exchanges like Binance to prohibit selling below 70 cents.
“It’s all decentralized until somebody gets wrecked,” Henslee says.
Henslee’s notion of the 48-hour memory
Henslee recently put out a video called the 48-hour memory, in which he criticized the short memory and attention span of most digital currency industry participants. He brings it up again here, mentioning a couple of other incidents that people have already forgotten.
- The ETH DAO Crisis – In 2016, someone hacked the Ethereum DAO and stole vast quantities of ETH. In response, the Ethereum Foundation hard-forked and rewrote the ledger. “The reality is they rolled back the chain,” Henslee reminds us.
- The Binance Hack – In 2018, Binance was hacked, prompting CEO Changpeng Zhao to mention rolling back the BTC blockchain. Few picked up on the implications of what that meant for decentralization at the time. It never happened, but the fact that ‘CZ’ let slip that it could happen was significant.
Henslee rightly notes that the notion of a free, decentralized economy is a bad joke. When the big players lose money, they’ll act the same way bankers do in the existing financial system and do whatever it takes to save themselves. The latest attempt by Binance to stop traders selling UST below 70 cents is just another example of this.
“This whole market is just a con show,” Henslee says. However, he doesn’t believe that UST losing its peg will bring down the wider digital currency space because stablecoin issuers have an infinite money printer.
Digital currencies were already falling
Henslee also notes that the UST situation isn’t the real reason for the selloff. In his view, it’s rising interest rates and the wider economy cooling. The UST incident is just a convenient scapegoat to hide the fact that digital currencies are risk assets and aren’t decoupled from the rest of the economy. However, Henslee doesn’t believe that the Federal Reserve can keep raising interest rates as all markets are getting jittery due to what they’ve already done. He likens those dependent on new cash infusions to drug addicts, saying that “they can’t quit cold turkey.”
Will digital currencies keep falling, and will UST cause the market to collapse? Henslee doesn’t think it will happen this time. He believes that the ‘crypto oligarchy’ will do whatever it takes to protect itself and stay on top. However, he does see problems ahead as Dr. Craig Wright’s court case against Coinbase and Kraken encourages people to speak out. However, he doesn’t want to put a timeframe on that.
Watch: CoinGeek New York panel, Tokenized Assets, Stablecoins and Custody with BSV
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