Börse Express – Crypto Investments: Is It All Lies And Scams? (Marc Oliver Lux)

There was a “Squid Game” coin a few months ago. Many fans of the Netflix series of the same name saw it as a good investment and invested without thinking. In the end, however, it turned out to be pure fraud: the initiators fled with the millions the investors had collected. One case out of several: a certain Ruja Ignatova, the initiator of another project (OneCoin), is now even being searched for publicly, also via “File number XY … unresolved”.

There are also other projects that raise more or less question marks. “DogeCoin”, which Tesla boss Elon Musk likes to promote via Twitter, was actually thought of as a gag and has even found another dog coin imitator in the Japanese version “Shiba Inu” – real use virtually zero.

It was completely different with the “Terra / LUNA” project: Terra was considered one of the most interesting and ambitious crypto projects ever. Although there were critics here as well, the majority of experts and investors were enthusiastic. It also had its reasons. After all, the creators behind the project ultimately wanted to create nothing less than a decentralized bank in the world.

For this purpose, so-called “stable coins” were issued, which are linked one-to-one to a classical currency (eg US dollars). There were three versions of Terra, namely linked to the US dollar, the euro and the South Korean won.

Stable coins are established in the crypto market and act as a parking facility for many investors: they do not have to exchange their money back to the real world if they want to avoid the usual sharp price fluctuations on the coins, and they can invest again very quickly at any time.

To create the one-to-one link, it would be obvious for a stablecoin just to keep the corresponding amount in US dollars as collateral. However, Terra did not rely on physical security, but on an algorithm that offered users incentives to keep the course stable. In addition to the stable coin, another coin was needed for this, which was named LUNA.

The system ran well for several years, which is why the LUNA coin rose and rose. While still around $ 0.20 at its lowest level in 2020, it rose to a record high of just under $ 120 in early April 2022. The world seemed to be doing well, especially as the ecosystem grew through additional projects.

However, a coordinated attack on Terra was apparently being prepared in the background: Unlimited mass sales initially caused the course of the stable currency to crash, so the connection to the US dollar broke completely. Liquidity in this market has dried up.

As users tried to counter it, the sister coin LUNA became hyperinflationary and fell like a stone in price. An avalanche followed: when the system was still running stably, there was almost a billion LUNA; in just one week, circulation rose to 6.53 trillion LUNA (6.530 billion!). So far no one was able to send in the perfect solution, which is not strange. The stable currency is therefore only quoted at 0.13 US dollars and LUNA at almost zero. Apparently there was no possibility of an emergency stop of the system with Terra. In the stock market, this is known from temporary trading stops, so that the panic that has arisen in the market can calm down again. The Terra project is probably dead. Even with a reset of the system, the trust of the many wronged investors has been lost. “Trust takes years to build, trust takes a second to lose!”, Warren Buffett once said.

Our position: It is not uncommon for fraud to occur in a new, unregulated environment. In principle, however, it is not a problem for the cryptocurrencies themselves. Individual cases of fraud in the stock market (Enron, Worldcom, Wirecard) would not abolish the entire stock market either. If in doubt, you do not need to invest.

Anyone who deals with cryptocurrencies – as with any other investment – should approach the matter more intensively and preferably do their own research. Unlike the banks’ deposit protection system, there is no unit in the crypto market that can step in to save if the worst comes to the worst. Each investor is on their own here. And investing in a coin due to a tweet from Elon Musk is just as dangerous as following a stock recommendation from a self-proclaimed guru.

You can find this and other asset managers with opinions and investment strategies at www.v-check.de.

From Börse Express PDF from 02.06. here to download

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