Speaker 1: mm hmm.
Speaker 1: Hello and welcome. It was a crash that wiped out
Speaker 1: an estimated $400 billion off the combined crypto market and
Speaker 1: its effects are still being felt today. The collapse of
Speaker 1: the terror USd, stable coin and lunar tokens have shaken
Speaker 1: investor confidence in cryptocurrencies, many of whom have lost their
Speaker 1: life savings
Speaker 1: yet despite this, many investors believe that the market will
Speaker 1: recover stronger than ever.
Speaker 1: I'm Jonathan. Perez from the management team here at C
Speaker 1: N A. And today we'll be looking at the five
Speaker 1: things you need to know about the crypto market crash
Speaker 1: joining me now for this podcast. Tarzan one, she's a
Speaker 1: board member from the Association of Cryptocurrency Enterprises and startups
Speaker 1: Singapore or access and Xenon Kapron, director of Fintech research
Speaker 1: and consulting firm Kapron Asia, Welcome to the show. Both
Speaker 1: of you. Thanks for having us.
Speaker 2: Thank you. Thanks for having us.
Speaker 1: When we talk about a crypto crash like this, the
Speaker 1: first thing of course everyone wants to know is how
Speaker 1: did this happen? But first some background unlike most stable
Speaker 1: coins which are fully backed by currency reserves, terrorist. Ust
Speaker 1: stable coin was backed by an algorithm linked to its
Speaker 1: sister token luna.
Speaker 1: And the price of that USd had soared in the
Speaker 1: last six months due to a platform called anchor
Speaker 1: Which offered a 20% yield to anyone who bought the
Speaker 1: USD and lent it to the protocol.
Speaker 1: Now coming off that then in your opinion, what precipitated
Speaker 1: the crash of terror. You kind of pointed to it, Jonathan.
Speaker 1: First of all, crypto is very new space in general
Speaker 1: and and many of these models, both from a technical
Speaker 1: perspective and a and a functionality perspective are still being
Speaker 1: worked out.
Speaker 1: And when we look at stable coins, we obviously have
Speaker 1: the stable coins like U S D. C. Or U
Speaker 1: S D. T. That are backed by a traditional currency.
Speaker 1: But then you have these algorithmic stable coins like terra
Speaker 1: and UST that were a new model and a new
Speaker 1: way of managing this float for a stable coin because
Speaker 1: it's early days. Obviously there are a lot of issues
Speaker 1: with this and it was really the perfect storm of
Speaker 1: conditions that precipitated this fall
Speaker 1: with a luna token going down and then Usd following.
Speaker 1: We saw the massive crash. So many people said it
Speaker 1: was predictable.
Speaker 1: When you look at an algorithmic stable coin. The code
Speaker 1: for these stable coins is public domain and people can
Speaker 1: look at that and the models. So there are a
Speaker 1: lot of people that were predicting it. But as you
Speaker 1: pointed out as well, there were a lot of people
Speaker 1: that had invested tremendously and really believed in both the
Speaker 1: business model and the technology behind it
Speaker 1: then, were there any warning signs for investors? I mean
Speaker 1: could they have avoided this?
Speaker 2: Yeah, on the high side, a lot of people in
Speaker 2: the crypto world did point out some witnesses like Zenon
Speaker 2: has mentioned earlier. Unlike other assets back, stable coins, Terror
Speaker 2: is an algo stable coin. Looking at the plan to
Speaker 2: defend its plaque and also in a way it is
Speaker 2: a decentralized stable coin but at the same time it's
Speaker 2: controlled
Speaker 2: by a centralized group of people. So there are few
Speaker 2: weeks spots that people on the hindsight pointed out and
Speaker 2: said it was pretty obvious that it couldn't withstand a
Speaker 2: bear market and the deep packing will inevitably happen.
Speaker 2: But what really kicked off the slide was first there
Speaker 2: was a sell off in terror and it seems to
Speaker 2: a lot of communities and people in crypto that it
Speaker 2: looked like a concerted effort to push down the price
Speaker 2: in terror in combination of a few things happening at
Speaker 2: the same time where the market was pretty weak there
Speaker 2: are some transfer of or creation of new pool by
Speaker 2: the lunar formation guard So it seems to be an
Speaker 2: opportunity to push down the price and terror is experimental
Speaker 2: defense set up to maintain the pack when the price
Speaker 2: of terror start to fall and lunar the market cap
Speaker 2: in the first place
Speaker 2: was in
Speaker 2: on par to defend that and then you went into
Speaker 2: this death spiral
Speaker 2: and obviously that
Speaker 2: affected the confidence of stable coins.
Speaker 1: And in fact that is the big surprise here right
Speaker 1: and then that this was supposed to be a stable coin.
Speaker 1: Now if this turns out it is not stable then
Speaker 1: where is crypto safe place then in your opinion people
Speaker 1: who have been in crypto for a while this kind
Speaker 1: of activity or this kind of collapse is nothing new.
Speaker 1: And when you look back to the beginning of Bitcoin,
Speaker 1: the collapse of Mount docks
Speaker 1: A couple of times where Ether was up to $1,000
Speaker 1: and then down to $100.
Speaker 1: These ebbs and flows and cycles are nothing new to
Speaker 1: people in the crypto space. The challenge here is obviously
Speaker 1: that there are a lot of new people that came
Speaker 1: into the ecosystem through luna and USt we've seen the
Speaker 1: reporting over the past couple of weeks where people have
Speaker 1: been really in many cases shattered. I lost a trivial
Speaker 1: amount of money with this, I played around with it
Speaker 1: and lost a bit myself, but
Speaker 1: Nothing that really hurt my life. But many people put
Speaker 1: a significant amount of their assets into this. And on
Speaker 1: one side you have the view that this is going
Speaker 1: to go to the moon and luna get up to
Speaker 1: over $100 at one point which for people who have
Speaker 1: bought in for less than a dollar, that's a huge return.
Speaker 1: You see the bright side, you know, you see the
Speaker 1: people that have made 100 X on investing in this.
Speaker 1: But you don't see the people that have lost money
Speaker 1: and unfortunately, you know when things go down and as
Speaker 1: zan mentioned this death spiral that we've seen, you have
Speaker 1: to be careful what you wish for because in decentralized systems.
Speaker 1: You know, you you have to have belief in the code.
Speaker 1: And as you pointed out, it seems to have been
Speaker 1: a concerted effort where somebody looked at the code, looked
Speaker 1: at the algorithm and figured out a way to exploit that.
Speaker 1: And that's not unique. I mean there have been many
Speaker 1: cases over the past couple of months where people have
Speaker 1: looked at these smart contracts or algorithms and seen holes
Speaker 1: in the code and ways to leverage that for their
Speaker 1: own benefit.
Speaker 1: Now at this point then some critics of Kryptos have
Speaker 1: actually called for more regulatory oversight. Do you think that
Speaker 1: could actually help to prevent this from happening again? Or
Speaker 1: is that also not a good thing for Kryptos?
Speaker 2: The immediate reaction, I mean it's reasonable to think that
Speaker 2: oh we need more regulations. We need to prevent people
Speaker 2: from over invested over participated in D5. But I think
Speaker 2: we've got to be aware that regulatory oversight is not
Speaker 2: a perfect tradeoff for risk. Yeah, because it is so new.
Speaker 2: And when you think about
Speaker 2: Decentralized entities or platform, it is almost impossible to regulate them.
Speaker 2: And I think that is probably why it takes a while, regulators.
Speaker 2: Central banks has been talking about stable coins regulations, but
Speaker 2: nothing really solid has come in and there were lots
Speaker 2: of warning signs. Even Singapore mes first spoke about regulating
Speaker 2: crypto in 2014
Speaker 2: and P. F. A. X.
Speaker 2: Didn't come in until 2020 things are happening so fast.
Speaker 2: In defi space regulation needs to be on point, right?
Speaker 2: Any under overregulation, What I would call like a gold
Speaker 2: displacement
Speaker 2: in regulatory oversight. That means that you did not achieve
Speaker 2: your goal and end up impacting innovation or like a
Speaker 2: negative growth in the up and coming industry. Yeah. So
Speaker 2: I think that that is something that is not just
Speaker 2: plain and simple. It's not binary. You need to put
Speaker 2: more thought into it in regulation.
Speaker 1: When Luna was over $100, it's very easy to say,
Speaker 1: you know, we don't need regulation, everything's going fine in crypto.
Speaker 1: But when all of a sudden you're luna is now
Speaker 1: worth fractions of a penny. That's the time that you
Speaker 1: might want regulations to be there. Because if that was
Speaker 1: a traditional financial product, in theory, the government would be
Speaker 1: there to support any kind of clean up afterwards. But
Speaker 1: right now the cleanup is being done by the same
Speaker 1: people that created the problem in the first place, which
Speaker 1: is the luna team. And it doesn't seem like many
Speaker 1: of these people are going to get their money back
Speaker 1: when we're in a bull market, we kind of lose
Speaker 1: sight of and we say that, you know, this is great,
Speaker 1: we don't need regulators, but all of a sudden when
Speaker 1: when things start to go paris shape, that's when you
Speaker 1: wish that you had regulation in some of this and
Speaker 2: perhaps what we are really looking for is accountability. People
Speaker 2: are saying that who is accountable for what happened. Right?
Speaker 2: Like talking to attacking the founders of terror. The accountability
Speaker 2: is it self governance.
Speaker 2: How do we even start that
Speaker 1: the crash after it happened, impacted the rest of the
Speaker 1: crypto markets as well. With the contagion briefly spreading to
Speaker 1: other stable coins like ethereum xpr, even Bitcoin hit its
Speaker 1: lowest point since december 2020 zen. And what do you
Speaker 1: see as the impact of this crash on the wider
Speaker 1: crypto market in the longer term? We had gone through
Speaker 1: a couple of years that roughly coordinated with
Speaker 1: the quantitative easing and the market expansion that we've seen
Speaker 1: in traditional economies that made money very cheap. And so
Speaker 1: that fueled investment in VC private equity as well as
Speaker 1: in crypto in general. So as the taps of quantitative
Speaker 1: easing started to be turned off and now we're starting
Speaker 1: to see inflation
Speaker 1: in certain places, actually quantitative tightening and higher interest rates,
Speaker 1: that cheap money is more difficult to come by. So
Speaker 1: it's kind of a natural extension that we would have
Speaker 1: seen with the economic cycles and the traditional economy, I
Speaker 1: think that plus the terror that didn't really help the
Speaker 1: situation in crypto because you had these kind of economic
Speaker 1: forces that were limiting the amount of new money that
Speaker 1: was coming into the market.
Speaker 1: And then all of a sudden you had this meltdown
Speaker 1: of terra
Speaker 1: many of the new people that came into the crypto
Speaker 1: space might have been burned by that and feel that
Speaker 1: this may not be the place for them. We're seeing,
Speaker 1: we're certainly seeing a bit of a more of a
Speaker 1: bear market in Crypto. But again, you know, this is
Speaker 1: nothing unusual. We, we've seen this in the past. The
Speaker 1: challenge in the past is because the, the expansion of
Speaker 1: crypto has been so tightly tied to the economic situation
Speaker 1: in traditional finance.
Speaker 1: If the situation for the global economy doesn't open up
Speaker 1: and money becomes cheaper, we might see an extended downturn
Speaker 1: in crypto as well, which will certainly be challenging because
Speaker 1: then it's more difficult for companies to get financing to
Speaker 1: hire to grow and to experiment, which is what's needed
Speaker 1: really for the crypto industry to continue to grow in
Speaker 1: the longer term,
Speaker 1: then what do you see as the long term impacts
Speaker 1: of this crash?
Speaker 2: I think what is significant to note is the correlation
Speaker 2: between traditional finance asset and crypto is increasing. I think
Speaker 2: Shannon would have more insight on that
Speaker 2: and I went with the bearish outlook of traditional assets.
Speaker 2: I think that has also, in a way brought down
Speaker 2: some of the pressure on crypto as well.
Speaker 2: Long term wise again, to repeat what dan has said,
Speaker 2: this is not the first time that the crypto market
Speaker 2: have seen a downturn personally, I've been in the market
Speaker 2: since 2014 when more gods have, that was supposed to
Speaker 2: be the blacks ones, then there are more and more
Speaker 2: blessed ones along the way. Right? We know and we
Speaker 2: believe that the crypto market will
Speaker 2: or the infrastructure, the community will come back stronger, especially
Speaker 2: what we have learned this time. And I think the
Speaker 2: past few years we experience or see a lot of
Speaker 2: retail participants in the device phase because of the high
Speaker 2: returns in terms of interest like returns. And of course
Speaker 2: the to the moon seems to be to the moon
Speaker 2: prices and
Speaker 2: it's a lesson for all of us.
Speaker 1: Well if you're just joining us, we are talking about
Speaker 1: the five things you need to know about the crypto
Speaker 1: market crash the recent one. And so far we've talked
Speaker 1: about some of the reasons that could have precipitated the crash.
Speaker 1: We also talked about regulatory oversight and how difficult that
Speaker 1: might actually be to implement.
Speaker 1: And also we're talking about the long term impacts of
Speaker 1: the crash and the fact that this is not the
Speaker 1: first black swan event.
Speaker 1: Now, moving on with our discussion then what do you
Speaker 1: think is the number one takeaway for investors from this
Speaker 1: particular crash? The lesson has been the lesson of crypto
Speaker 1: since the very beginning is caveat emptor buyer beware the
Speaker 1: money that you put into this space? It's very easy
Speaker 1: to forget about the losses from MT GOx or the I. C. O.
Speaker 1: S from a couple of years ago or indeed terror.
Speaker 1: You know we as humans have very short memories and
Speaker 1: we often have this cognitive bias to seeing the upside
Speaker 1: and not much of the downside. And so I think
Speaker 1: for the average individual, maybe it's useful to have a
Speaker 1: little bit of money in new crypto but you know
Speaker 1: only invest what you can afford to lose because as
Speaker 1: many people have found out it can go to zero
Speaker 1: or
Speaker 1: close enough that it becomes statistically irrelevant how close to
Speaker 1: zero it is. It's it's fundamentally worthless and we've seen
Speaker 1: that
Speaker 1: in this space. So it's just very important that although
Speaker 1: there are heavy returns from some of these coins or
Speaker 1: some of these assets, it all needs to be taken
Speaker 1: with a risk attitude appropriate for the individuals. I think
Speaker 1: what will be interesting to see is what happens on
Speaker 1: the institutional side. Some institutional investors have been heavy into
Speaker 1: terra and luna and lost out as well. But it'll
Speaker 1: be interesting to see what happens to their appetite as well.
Speaker 1: You know, many of them are more in the kind
Speaker 1: of traditional kryptos like Bitcoin and ethereum.
Speaker 1: But certainly many had exposure to some of these newer
Speaker 1: ones as well. So what they do over the next
Speaker 1: six months will be really indicative and telling of what
Speaker 1: to expect as we look forward, then what's your chief
Speaker 1: takeaway from this event.
Speaker 2: I seem to be saying the same thing after all,
Speaker 2: the downturn is really again, diversification. I came from the
Speaker 2: traditional finance background. I used to think that if you
Speaker 2: know what you're doing, you don't diversify. Sometimes people say
Speaker 2: that you know there are three staker who say that right? No,
Speaker 2: I think not the case when you are new to
Speaker 2: the market first thing learn as much as you can.
Speaker 2: I have people who bought luna and could not explain
Speaker 2: to me the minting and burning mechanism.
Speaker 2: I think that's wrong. You know, if you're going to
Speaker 2: buy something at least know the basic at least the
Speaker 2: very least and know who is the LFG lunar polishing
Speaker 2: part which was just set up in Singapore in january.
Speaker 2: The learning part of being educated part is really important.
Speaker 2: What is level one tokens, what is level two protocol
Speaker 2: and stuff like that. And the other thing is not
Speaker 2: just
Speaker 2: purely
Speaker 2: looking at what's happening in the crypto market because the
Speaker 2: correlation is increased I think with the traditional finance side.
Speaker 2: So I think I might have to look at some
Speaker 2: of the macro that caught up with what is happening
Speaker 2: around the world. Non crypto wife,
Speaker 2: I am still bullish of the whole industry
Speaker 2: being the fact that crypto I believe is going to
Speaker 2: be the key pillars of web 3.0, we're talking about
Speaker 2: medals which is still in the early stages, it has
Speaker 2: to be and it will be one of the key pillars,
Speaker 1: Crypto is not going away anytime soon. Even Terror Ceo
Speaker 1: da Quan doesn't seem to be going away either. He's
Speaker 1: still trying to revive the Blockchain? But where should investors
Speaker 1: go from here? Those and like what is your advice
Speaker 1: stick to the big ones or should they also experiment
Speaker 2: again? I think don't invest in anything. You don't know.
Speaker 2: That's one, even though people say, you know you should invest,
Speaker 2: maybe you should buy some level two protocol tokens, but
Speaker 2: if you don't know anything about it on it first
Speaker 2: and get involved. The community, the community is open. There
Speaker 2: are a lot of discussion online on discord on telegram.
Speaker 2: So these are also breeding ground of scams. I have
Speaker 2: to say that especially I think with the recent outright
Speaker 2: banned of advertisement, right? And also regulatory move all over
Speaker 2: the world, it could have created pockets of opportunity for
Speaker 2: scammers to reach out to genuine bias, right? And genuine
Speaker 2: learners of crypto. So I think besides knowing what to buy,
Speaker 2: where to put your tokens or where to put your
Speaker 2: fiat money is important to recognize what is a scam. Yeah,
Speaker 2: there are people who thought they bought Bitcoin. They said
Speaker 2: I'm safe. I bought Bitcoin or I bought ethereum. They
Speaker 2: actually downloaded a scam wallet and lost it all. So
Speaker 2: that's one thing that we must be mindful of as well.
Speaker 1: So zen and some critics have actually said that retail
Speaker 1: investors shouldn't get involved in crypto because the hedge fund
Speaker 1: guys are the ones holding all the power. Do you
Speaker 1: agree with this and how can retail investors actually protect
Speaker 1: themselves in this market?
Speaker 1: It's a very challenging question because when you look at
Speaker 1: traditional markets, you limit certain asset classes to accredited investors
Speaker 1: or basically individuals that have a certain level of income
Speaker 1: or investable assets to be able to participate in I. P. O. S.
Speaker 1: And private equity or some of the more riskier high
Speaker 1: risk but potentially high reward asset classes.
Speaker 1: And the challenge with crypto is that it is very
Speaker 1: high risk, it is very high reward, but there's no
Speaker 1: gateway and no gate that controls who comes in and
Speaker 1: out of the market. So you could argue that is
Speaker 1: good because and that's what many of the people within
Speaker 1: the industry think is that you have this asset class
Speaker 1: that's open to everybody and everybody can participate but everybody
Speaker 1: can also lose in these cases as well.
Speaker 1: And that's really the challenge for the industry is and
Speaker 1: and for the regulators as hole is where to draw
Speaker 1: that line. I mean, here in Singapore, we've seen regulators
Speaker 1: pushback against crypto advertising, presumably the idea of not bringing
Speaker 1: as many retail investors into the market. The question is,
Speaker 1: should retail have access to this market in general? And
Speaker 1: that's a difficult question to answer
Speaker 1: because you really have the spectrum of people as dan
Speaker 1: pointed out that have some idea that I have no
Speaker 1: idea that have a complete understanding of what some of
Speaker 1: these coins and protocols look like and others that are
Speaker 1: completely flying blind and so that's really the challenge in
Speaker 1: that and where you draw the line for this.
Speaker 2: Can I just add one more thing when we look
Speaker 2: at the victims, what I call of luna this time around.
Speaker 2: I think the worst heat were the group of people
Speaker 2: who took leverage to buy the crypto. So I think
Speaker 2: there is one place that please do not ever go
Speaker 2: there unless you're super sophisticated or you have some hedging
Speaker 2: solution in place but do not leverage to buy crypto,
Speaker 1: zen and zen. Thank you so much for joining me
Speaker 1: in this podcast. Thank you. Thank you. So to recap
Speaker 1: not all stable coins are the same. Those not backed
Speaker 1: by hard currency can be manipulated.
Speaker 1: More oversight is needed but it is not easy to
Speaker 1: regulate Kryptos. Kryptos are not immune to the wider global
Speaker 1: economic conditions, diversification and education is key. You must know
Speaker 1: what you are investing in
Speaker 1: and those are the five things you need to know
Speaker 1: about the recent crypto market crash. Thanks for listening. Money.
Speaker 1: Mind airs every saturday at 10 30 PM on media
Speaker 1: cops C. N. A. You can also catch us online
Speaker 1: at CNN dot asia or on Youtube.
Speaker 1: Mhm.
Speaker 1: Mhm