Old leeks who have experienced the thunderstorms of Mentougou, 94, 312, 519, $LUNA, and FTX have experienced frequent tragedies in the currency circle. Investments need to be prudent and pay attention to policy implications and technical loopholes. Plunges caused by policies or natural disasters are good opportunities for bargain hunting, while encryption technology problems will take longer to recover.
Those who have experienced the thunderstorms of Mentougou, 94, 312, 519, $LUNA, and FTX are definitely old leeks in the currency circle.
Last week, everyone successfully passed this year's 519. Let's take stock of the previous tragedies in the currency circle. I also remind everyone that investment is risky and you need to be cautious when entering the circle~
Let’s sort it out with you from the chronological order of the tragedy.
01. Mentougou Incident
The Mentougou incident in February 2014 is regarded as one of the most serious incidents in the history of the cryptocurrency industry. At that time, the world's largest Bitcoin exchange, Mt. Gox (Mentougou), suffered a hacker attack and lost nearly 850,000 Bitcoins, accounting for approximately 7% of the world's total Bitcoins. This incident not only caused the price of Bitcoin to plummet by 80%, but also triggered a crisis of trust in the cryptocurrency market.
This incident happened 10 years ago. If so many assets were stolen in other industries, the money would definitely not be returned.
Unfortunately, Bitcoin has risen too fast in the past ten years, and the judicial department’s compensation is based on legal currency as the unit of judgment. Therefore, some of the remaining Bitcoins after Mentougou was liquidated can actually compensate all the original creditors’ losses. Hence the recent news that Mt. Gox is preparing to distribute approximately 142,000 Bitcoin ($BTC) and 143,000 Bitcoin Cash ($BCH) to creditors, with a total value of more than $9 billion.
02, 94 incident
This 94 incident occurred in 2017. This incident was triggered by supervision in mainland China.
That year, various myths of sudden wealth were born in the currency circle. Billions of hearts yearning for wealth and freedom are just around the corner. A good opportunity is right in front of you, how can you let it go so easily? Therefore, a large number of ICO projects have spread like viruses. Even the aunts who danced in the square stopped dancing and began to study ICOs. For a time, many junk projects and junk coins sprung up like mushrooms after a rain.
How could the regulatory authorities ignore such a chaotic and lively situation?
On August 21, the central bank headquarters received a relevant emergency report, which clearly pointed out that ICO was a disguised illegal fund-raising. Relevant people from the central bank studied a large number of ICO white papers and concluded: "90% of ICO projects are suspected of illegal fund-raising and subjective and intentional fraud. In fact, less than 1% of ICOs actually raise funds for project investment."
A blockchain event that was supposed to be held on September 2 was suspended by the relevant authorities (Beijing Financial Bureau). The reason behind the suspension of the meeting is actually because supervision has made a judgment on ICO, and relevant normative documents will be issued in the near future.
On September 4, 2017, the bombshell finally dropped. Seven ministries and commissions jointly issued the "Announcement on Preventing Token Issuance Financing Risks", defining ICO (Initial Public Offering) as illegal public financing without approval. The announcement stated that ICO is suspected of illegal sales of tokens, illegal issuance of securities, illegal fund-raising, financial fraud, pyramid schemes and other illegal and criminal activities, which has seriously disrupted the economic and financial order.
As soon as the big move came out, Bitcoin fell by 32%, and Litecoin ($LTC) fell by 57.3%. From this drop, we can also see the influence that mainland China had on Bitcoin.
Faced with the scythe of regulation, many exchanges were forced to move overseas, project parties withdrew their currency, the currency circle plummeted, and panic continued to spread.
However, after the short-lived impact of the 94 incident, Bitcoin still emerged from a super bull market. By the end of 2017, Bitcoin reached an all-time high of US$20,000, a six-fold increase in three months.
The exchange found that it could return to China to continue trading through currency-to-crypto transactions and over-the-counter fiat currency transactions. Binance also took advantage of this opportunity to achieve a super counterattack and stand on the bright top of the exchange in one fell swoop, until today.
Maybe without the original 94 incident, there would be no Binance today, right?
03. March 12 Incident
Fast forward to 2020.
On March 12, 2020, according to Binance data, Bitcoin fell from a high of $7,966.17 to a low of $4,410. On March 13, it ushered in the darkest moment, falling to a low of $3,782.13. The largest drop in two days exceeded 50%. Bitcoin had just returned to $10,000 in the past few weeks.
At that time, affected by the epidemic and the global economic recession, U.S. stocks had begun to plummet. Many crypto investors regard Bitcoin as a safe-haven asset, but whether a target is a safe-haven asset or not depends on the consensus of more investors.
It has only been 4 years since 312 happened, and the more than 3,000 US dollars worth of Bitcoin has increased more than 20 times this year!
04. May 19th Incident
The 519 incident occurred in 2021. It took just over a year from 312 to 519. Before that, Bitcoin had soared to more than 60,000 US dollars. Those who bought Bitcoin at the bottom of 312 realized more than ten times the profit in one year.
The time came on May 18, 2021. The central bank issued a document, and the three major associations in the financial industry spoke out: Providing virtual currency trading services is suspected of illegal financial activities!
The market was relatively stable that day, and even rose slightly. Until May 19, many people believed that this was not the first time that this had happened, and it was normal for it to fall a little. By evening, Bitcoin fell from $44,000 to $44,000 that day. A drop of 34% from $29,000!
During this period, mines were shut down, mining machines went overseas, and financial institutions were removed from the shelves. For a time, the currency circle was in turmoil, and everyone felt that the bull market was over. This is the impact that 519 has brought to the currency circle. The aftershocks are still there today, and leeks cannot forget the fear of being dominated by 519.
After 519, many airmen who survived the bull market felt that they had found an opportunity and opened short positions one after another. They thought that this short position could last for a few years and they would definitely make a fortune. However, they never thought that Bitcoin would suddenly come back and break through a new high to reach $67,000. But this time, the contract players were basically cleared out, and the market really went according to the script, and the only remaining air force was also wiped out by this wave of bloodshed.
05. $LUNA and FTX crash incidents
The time has come to 2022. This year, the thunderstorms of $LUNA and FTX occurred successively, which in turn triggered a crisis of trust in the entire cryptocurrency market, and the market entered a deep bear.
Around 2018, Do Kwon, a Korean who graduated from Stanford University with a major in computer science, established Terra, a public chain ecosystem around stablecoins. The main gameplay of this ecosystem is completed by these two coins:
One is the token $LUNA on the Terra ecosystem
The other is the stablecoin $UST that exists on the Terra chain
The two coins interact like this:
One $UST = $1 worth of $LUNA. This means that if the price of $LUNA is $1, you can exchange it for one $UST, and if the price of $LUNA rises to $100, you can exchange it for 100 $UST.
$UST and $LUNA have a "two-way destruction and casting" relationship. Meaning, when you exchange $LUNA for $UST, there is one less dollar of $LUNA and one more $UST on the market, and when you exchange $UST for $LUNA, there is one less $UST on the market.
This gameplay is the algorithmic stablecoin that was very popular at the time, and the market value of $LUNA once reached 40 billion US dollars.
This type of stablecoin has a destiny, that is, $LUNA must have value. No matter how low the price is, it cannot be too close to zero. Otherwise, no matter how many $LUNA you send, it will not affect the price fluctuation of $UST.
In May 2022, many large investors began to sell $UST, causing the price of $LUNA to plummet by more than 90% to $10, and $UST completely unanchored and fell to $0.6. But at the same time, a large number of people started buying $LUNA at the bottom.
On May 11, Do Kwon issued an announcement stating that it could not rescue the market and could only rely on the arbitrage mechanism to help $UST recover its price. $LUNA fell by more than 90% after hearing the news, with the price falling below $1, and $UST once plummeted to $0.3.
On May 12, $LUNA continued to plummet 99% to almost zero, and $UST price fell below $0.2.
On May 13, many exchanges delisted $LUNA and suspended trading, and the Terra public chain was shut down.
If the $LUNA incident can only mean that the business model of algorithmic stablecoins has been falsified, then the FTX incident that occurred at the end of 2022 really shocked many crypto users.
As the second-ranked exchange in the crypto market at the time, FTX has received investment from a number of well-established large funds such as Sequoia, Temasek, and BlackRock. It is said that it has also conducted due diligence for several months to determine its valuation in the primary market. It reached 32 billion US dollars.
Just such a project by Miao Zhenggenhong collapsed at the end of November 2022. The internal management was in a mess and customer funds were misappropriated at will.
With the explosion of FTX, Binance has further stabilized its position as the number one exchange.
Affected by the pairing of $LUNA and FTX, the price of Bitcoin also dropped from 60,000 at the beginning of 2022 to a minimum of 15,000 by the end of the year, a 75% plunge.
06. Is there a good opportunity to buy bargains after a thunderstorm?
Having said all this, have you noticed?
After every tragedy, there is a much-coveted bargain-hunting opportunity!
The five thunderstorm events we are talking about today:
There are only two times that are really related to encryption technology, namely the Mentougou theft in 2014 and the $LUNA and FTX thunderstorms in 2022.
When the Mentougou incident broke out in 2014, Bitcoin fell for a year and a half before recovering and rising again. During this period, many crypto investors developed a deep distrust of cryptocurrencies, but those who have persisted are now OGs.
After the $LUNA and FTX crashes in 2022, both investment institutions and ordinary investors have developed a deep distrust of encryption, and Bitcoin also fell for a year and a half before recovering.
The other two times were affected by the policies of the Chinese mainland government, which shows the deep influence of us Chinese on the encryption circle.
Prices recovered just two months after 2017's 94, and there was a surge at the end of the year.
Just four months after the 2021 519 incident, Bitcoin hit new highs.
The 312 Incident was more affected by the epidemic. This was considered a natural disaster, and the price of Bitcoin recovered within two months.
To sum up, Bitcoin is not afraid of natural disasters and policy impacts. Plunges caused by these factors are often good opportunities for bargain hunting.
It is recommended that everyone pay more attention to the tragedies caused by the encryption technology itself, whether it is hacked or the application scenario is falsified, these factors will often affect the consensus of encryption investors, thus causing long-term depression.
When buying the bottom, I would also like to remind you that tragedies caused by policies or natural disasters will take a relatively short time to bottom out. However, due to encryption itself, investors have lost trust in the industry, and it will take more than a year to recover.
Many big names this year believe that this is the eve of the explosion of encryption application scenarios, so viewers should pay more attention!
If large-scale application scenarios really emerge, then we can still continue to enjoy the bull market.
Cryptocurrency has never been afraid of policy regulation or natural disasters. It is only afraid that people in the crypto community will mess around and lose the trust of investors, and then it will really be in trouble~
This article is reproduced with permission from: "PANews"
Original author: Crypto Market Observer
