Column | The bad apples in the crypto exchange

Try your luck! Play smarter! gain! If Legal Protection Minister Franc Weerwind (D66) makes good on his promise and tackles the onslaught of online gambling advertising, can he stop cryptocurrency investment ads in one fell swoop?

For most people, investing in cryptocurrencies is an ordinary gamble. A bet that can go wrong, as for the half million Dutch who entered cryptocurrencies last year. They didn’t want to be left behind while the rest of the street became a millionaire.

The world of cryptocurrencies is now living through its version of 2008, the year the major financial markets crashed. Since its peak in November 2021, the total crypto market has shrunk by 40 percent, from $2.1 trillion to $1.26 trillion. Bitcoin, the most popular currency, fell with the same force.

The collapse was hastened by economic uncertainty 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 recover; more serious is the system error that came to light last week. The supposedly stable monetary land imploded. Terra was one of the most popular stablecoins and promised a secure link to the dollar. It turned out to be a $15 billion boon with no decent collateral. Every dollar invested is now worth a fraction of a fraction of a fraction of a penny.

Terra investors were attracted by the incredibly high interest rate yield (19.5%) on loans issued with their money. That attracted a lot of small investors who thought they were safely keeping their crypto savings or earnings. Instead, the value plummeted 99 percent in 24 hours. Terra’s founder, Do Kwon, no longer answers the phone.

In 2021, Do Kwon himself received another $150 million from major crypto investors who saw terra as the promised land; the basis of a whole range of financial services, with which you can pay with the same ease as with Simple Money. With no bank or control authority in between, an algorithm would take care of everything.

Also read: ‘Stable’ cryptocurrency Terra crashes

Terra demise dents confidence in ‘DeFi, decentralized financial systems built on blockchain technology. If a large investor can collapse an entire economic ecosystem, decentralization may not be ideal.

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

That fits with the picture painted by Mark Nuvelstijn, one of the founders of the Dutch crypto exchange Bitvavo, where terra could be traded. He says over the phone that people are “scared” by this example and are learning to be “more skeptical and careful” with their money.

With terra, a big bad apple disappears from the basket of cryptocurrencies. But there is nothing stopping Do Kwon or anyone else from presenting another bad apple. As long as regulators have no control over the underlying collateral, ‘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 world of cryptocurrencies you don’t have to look at the faces of gambling front men Andy van der Meijde and Wesley ‘King Toto’ Sneijder. Although… Sneijder now too man of influencewhich is trying to sell its own second cryptocurrency.

His first coin, you don’t expect it, failed.

marc hijink write about technology here. Twitter: @MarcHijinkNRC

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