Column | The bad apples on the crypto exchange

Try your luck! Play smarter! win! If the Minister of Justice Franc Weerwind (D66) keeps his promise and tackles the deluge of advertisements for online gambling, can he then please put an end to the ads for crypto investments in one bet?

For most people, investing in cryptocurrencies is a common bet. A bet that may turn out to be wrong, such as for the half a million Dutch people who went into crypto last year. They did not want to be left behind while the rest of the street became millionaires.

The cryptocurrency world is now living its version of 2008 – the year in which the ordinary financial markets collapsed. Since the peak in November 2021, the total crypto market has fallen by 40 percent, from $ 2.1 trillion to $ 1.2 trillion. Bitcoin, the most popular currency, fell just as hard.

The crash was accelerated by economic insecurity caused by the war in Ukraine and rising interest rates. Why put your money in a risky crypto investment when you can also grow it in a secure savings account?

Bitcoin can bounce back; more serious is the system error that emerged last week. The supposedly stable currency terrain imploded. Terra was one of the most popular stack coins and promised a secure bond to the dollar. It turned out to be a $ 15 billion blessing without decent security. Every dollar invested is now worth a fraction of a fraction of a fraction of a cent.

Terra investors were lured by the dividends of improbably high interest rates (19.5%) on loans issued with their money. It attracted many small investors who thought they were safely parking their savings or cryptocurrency profits. Instead, the value dropped by 99 percent in 24 hours. Terra founder Do Kwon no longer picks up the phone.

In 2021, the same Do Kwon received an additional $ 150 million from large crypto investors who saw terra as the Promised Land; the basis of a whole range of financial services that you could pay with just as easily as with regular money. No bank or controlling authority in between, an algorithm would take care of it all.

Also read: ‘Stable’ cryptocurrency Terra collapses

Terra’s death weakens confidence in ‘DeFi, decentralized financial systems built with blockchain technology. If a large investor can collapse an entire economic ecosystem, decentralization may not be ideal.

Buzzwords like DeFi, NFT and Metaverse fueled the cryptocurrency fever among investors who traded to forget the lockdown blouse. You can see that everyone now has better things to do from the crypto-trading platform Coinbase, which has lost 85 percent of its market value since November.

It fits into the picture that Mark Nuvelstijn paints, one of the founders of the Dutch crypto exchange Bitvavo, where one could trade in terra. He tells over the phone that people are “scared” of this example and learn to be “more skeptical and cautious” about their money.

With terra, a large rotten apple disappears from the crypto basket. But there is nothing to stop Do Kwon or anyone else from inventing another bad apple. As long as regulators do not have control over underlying guarantees, the ‘stable’ currency will remain a gamble. Just like in the casino: try your luck, play smarter and win! Or loss.

The only difference is that in the crypto world you do not have to look at the faces of gambling galleon figures Andy van der Meijde and Wesley ‘King Toto’ Sneijder. Although … Sneijder is now too influencerwhich is trying to sell its second own cryptocurrency.

His first coin – you do not expect it – failed.

Marc Hijink writes about technology here. Twitter: @MarcHijinkNRC

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