Talk about tara luna talk about carol. Why did tara luna come on tara luna? All right guys? I was out of town this last weekend getting beat up by michael reeves, but now that i'm back in my office, let's talk about the collapse of tara luna because i have to say this was the most catastrophic large-scale event in cryptocurrency that i have ever witnessed And it sets the dangerous precedent that nothing you buy is safe. No really bitcoin just witnessed the seventh straight week of losses. For the first time ever in history, investors have slowly begun to lose their faith in stable coins, as several have deep pegged from the one dollar value, and now there's the concern that things are about to get a lot worse.

The fact is, the more i've looked into this and the deeper down the rabbit hole. I've researched the more concerning the trend becomes, and there are some serious implications for the entire cryptocurrency market that everybody should be made aware of because i promise this affects a lot more than meets the eye. So let's talk about the terra luna crash. What's going on how much worse this could get and what this means for all of us as investors, because i have to say there is so much fun being spread on youtube right now, based on random theories and baseless claims with no merit whatsoever.

But before we start, if you appreciate information like this, it would mean a lot to me if you tear that like button apart and subscribe for the youtube algorithm, since it helps me out tremendously. So thank you guys so much for doing that and also big. Thank you to masterworks for sponsoring this video, but more on that later. First, we need to talk about what tara luna actually is and its impact throughout the entire cryptocurrency market.

So to do that, we got ta break down the anatomy of a stablecoin. In this case, a stablecoin is simply a cryptocurrency whose value is pegged one to one to the us dollar. So it's no different than you giving me a dollar and me giving you back a virtual token redeemable for one dollar of us currency. In fact, it's very similar to the creation of physical money that we use day to day, which was originally created to facilitate transactions that could later be redeemed in gold.

The more you know, anyway, stable coins play a fairly important role within the entire cryptocurrency ecosystem, because they allow you to store your money in a way. That's stable, easily transferable and bridges the gap between your everyday money and your gambling money. I mean your digital holdings. No, but in all seriousness, stable coins provide a great way for you to store your assets online without the volatility and with the assurance that your money's not going to fluctuate plus or minus 20 in an hour, because elon musk decides to post a tweet.

So how does it work? Well, first, we have a stable coin, that's backed by the us dollar or more appropriately put by cash equivalents. This could mean that you give them a dollar. They give you back a one dollar stable coin and then they're free to lend out your money while holding an iou as a reserve. This way, there's always some type of backing that could be directly redeemed for us dollars.

The value should remain fairly stable and even though there are some serious concerns that i'll address a little later for the most part, it's fairly straightforward, but second, we got another type of stablecoin based on an algorithm. How could that go wrong? Well, in this case, instead of being backed by reserves in a bank account, an algorithmic stablecoin regulates its price by trading between two coins, one whose value could fluctuate day by day, depending on supply and demand, and the other which gets bought and sold in proportion to How far away it is from a dollar and if that sounds extremely confusing, here's how this works in relation to luna, when the price of their one dollar stable coin trades for more than a dollar holders, could cash in on that tiny profit and as more people Do that the price of the stable coin drops back down to a dollar. On the other hand, when the price drops below a dollar holders could buy that one dollar token for less than its face value with the expectation of selling it shortly after for a profit. So now that you at least know the very basics of how stable coin works.

Here's where we get to the very interesting and very juicy part terralona was one of the most popular cryptocurrencies, with their stablecoin becoming the third largest within the crypto ecosystem and their luna token entering the top 10 with a market cap of 41 billion dollars. At the peak i mean by all accounts, tara luna seemed unstoppable, having reached as high as 117 dollars a coin with 1.1 billion dollars held in bitcoin as a reserve, except it was stoppable. Now up until recently, the tara luna community was extremely massive. Their project was created to combat the entire banking system by working to replace credit card networks, banks and payment processing or basically, while credit card transaction fees would cost anywhere from two and a half to three percent.

Luna would be able to do the same thing on the blockchain for a fraction of the price, and it was very popular over. A hundred projects were built within the terra ecosystem and it quickly gained widespread adoption, including one that got everyone's attention and drove a lot of money onto the network, and that would be a 20 yield on your money. Essentially, you would be able to take your one dollar ust, stable coin, lend it to other people who want to borrow it and you get paid back 20 interest well. Those rewards were so appealing that a lot of money went into luna for the sole purpose of just being able to get that 20 return and from there we saw post after post, where people would invest their entire savings accounts to earn 20 or use it.

As a way to save up for the down payment of a house and the response, along with the criticism, was almost entirely the same, twenty percent probably isn't sustainable long term, but you may as well get it while they offer it or i guess, as this poster Says long story short, there isn't much of a catch, it just works, and that, of course is where the problem begins. Now, before we go into that, i got ta say this is a prime example of why you diversify. For example, even though i own a lot of real estate, i also buy index funds. I keep a portion of my portfolio in cash and look to alternative assets.

Like cars, watches and collectibles to build my wealth, so when i saw cnbc talking about a new fintech platform called masterworks that allows you to diversify right from your phone, i was intrigued. Here's what i found the most surprising contemporary art was one of the highest performing alternative assets. In fact, the sale of andy warhol shot blue maryland recently brought in a whopping 195 million dollars to the seller, and that's just the tip of the iceberg. Now, obviously, most investors don't have a spare 195 million dollars lying around to buy an andy warhol, but masterworks can help they let you access their exclusive investments from names like banksy picasso and other iconic artists for just a fraction of what the billionaires pay to purchase.

That's because masterworks buys the earth themselves and then they issue shares for anyone to add to their portfolio. Plus contemporary art has outpaced the s. P. 500.

Total return by 164 percent over the last 25 years. On top of that, the three paintings that masterworks have sold so far have each returned over 30 percent net irr to investors. Of course. Legally, i have to follow that with past performance.

It's not a guarantee of future results, but still over 30 is incredible, especially for a market like this. So if you want priority access to skip the wait list on their newest offerings, use the link down below in the description to learn more and sign up today and now, of course, with that said, let's get back to the video now here is where we put On the tinfoil hat, because there are several, how should i say, conspiracies floating around about what caused the collapse so to entertain those theories? Here's what we have so far. First, on the most basic level, coindesk reported that there was a mass sell-off of luna onto the open market during a time when cryptocurrency was already beginning to fall, and for the first time ever, the market cap of luna was lower than that of the one dollar Stable coin - meaning there is no longer one dollar worth of luna to back every one dollar worth of ust. So in an attempt to hold off an entire collapse, the luna foundation deployed about two billion dollars with their bitcoin to bridge the gap, but that only lasted so long until the cracks began to reappear and 48 hours later the entire project evaporated.

But that, of course begs the question: what would cause the sudden sell-off to begin with? Well, the second story was that the terra platform was maliciously attacked and the story goes something like this. One wallet dumped 350 million dollars worth of ust all at once, causing the price to destabilize and forcing luna to sell their bitcoin reserve. That, of course, caused the price to fall, which would make that person a lot of money if they opened up a short position. Right before selling there's a twitter thread detailing everything that i'll link down below in the description for anyone curious or who wants more information on this now.

The third rumor, on the other hand, was that blackrock and citadel were behind the coordinated attack and, as usual, all of this begins on twitter. In this case, he claims that blackrock and citadel conspired to borrow 100 000 bitcoins on gemini to then go and buy 25 000 bitcoin worth of ust. Then they did a private deal with dokwan the creator of tara to trade, the remaining 75 000 bitcoin for ust at a discount, thereby lowering the liquidity of ust. At that point, they dumped everything causing the price to fall, and then they could buy bitcoin even cheaper to pay back the original loan and profit the difference yeah seriously as ridiculous as that sounds, i can't make that up.

Basically, all it takes is one rumor and people copy and paste it everywhere is a fact, even though, by the way, there is zero evidence that i could find linking them to any of this, but fourth, the most plausible scenario that i could find according to business, Insider is that somebody bought one billion dollars of ust, while at the same time, shorting bitcoin, eventually that wallet sold and the combination of a large sell-off at the same time that the entire cryptocurrency market was suffering caused. A bank run where people lost faith in luna and once that faith was destroyed, it was never gon na recover. To me, this just seems like the most realistic explanation that somebody found an exploit and then used it to make a very quick profit, especially when the founder himself was publicly taunting billionaires to do an attack to see what happens is outlined by coffeezilla. It's also not the most confidence inspiring either when the founder dokwan was also behind another failed stablecoin project known as basiscash, and he's now proposing to create a new stablecoin that would make up for the loss of tara luna, which i think it's pretty safe to say You should probably stay far far away from that, but what about the rest of the cryptocurrency market since another stablecoin dei also just recently de-pegged from its one dollar value well tether recently saw a drop as low as 95 cents.

Well. First of all, this should go without saying that the higher the potential return, the more you risk losing money, even though i'm directing this towards cryptocurrency. It also applies towards everything. There is no scenario where earning above 10 is risk-free, except for eye bonds and there's a reason why even the most reputable banks don't pay anymore between one and three and a half percent at the very most sure.

Even though there is certainly the assumption that high yields are simply the cost of doing marketing and it's fueled by endless venture capital, so you may as well get some of that money for yourself. The fact is, it'll only work until it doesn't, as of now luna's dropped from a high of over a hundred dollars, a coin down to zero point: zero, zero, zero one, eight. So, for every ten thousand dollars you invested, one dollar would be left the other sobering reality that everyone needs to be made. Aware of is that with cryptocurrency it's not protected by fdic or sipc insurance? That means if your investment disappears or the brokerage files for bankruptcy.

There is no protection that you will get any return of your capital. On top of that, in a previous analysis, i did that covered the top cryptocurrencies by market cap throughout the last four years. Only eight cryptocurrencies have stayed in the top 30.. That's it.

The rest have fallen and we don't talk about those anymore. That just means, what's top 10 today, is very unlikely to be what's top 10 in the future, and that also applies to stocks throughout the last 20 years, only one company has stayed within the top 10, and that would be microsoft. The rest have dropped off while new companies take their place. Now.

Definitely don't get the wrong idea about all of this, because i'm a cryptocurrency investor and i get the appeal, but it's also equally important - to have a level-headed, realistic approach to the risks and rewards. And that means not investing more than you could lose understand. What you're investing into and realize that there are a lot of risks? It's also why it's very important to use a reputable exchange like ftxus, where they're giving you all the way up to a hundred dollars with the free crypto down below in the description when you use the code gram. So none of this is meant to scare off investors, but it is meant to be a voice of reason in a market.

That's extremely volatile truth be told. I see no other option. Besides one day, stable coins will need to be regulated and strictly enforced to ensure that they're, properly, backed and operated after all, most platforms have nothing in place to prevent you from borrowing cryptocurrency, taking it to another platform as collateral, borrowing, even more repeating the process. Another 50 times and pretty soon you'll have fifty dollars for every one dollar that you deposit.

My biggest concern is that the entire market could be propped up by over leverage and there's no way to accurately verify how much of this is pure speculation and how much is a reality that we have a major problem on our hands. If the market were to suddenly collapse out of nowhere, we also have the same risks with tether, which has continually come under scrutinization that maybe it's backed by nothing and they're, simply creating their own currency to buy and prop up the price of bitcoin. But you know what we'll save that for another time. All of that is to say that at some point, regulation is gon na have to come into play and i think in the big picture, it's going to add a lot of legitimacy to many projects and will make people feel a lot safer to invest their money.

In crypto, until then just play it safe, don't invest any more than a small part of your portfolio. Understand that everything has a reward in direct proportion to the chance that you could lose everything and always no matter what subscribe and hit the like button. If you haven't done that already so with that's it guys. Thank you so much for watching and also while you're at it.

You may as well get your free stock down below in the description when you sign up for public using the code grand because that stock could be worth all the way up to a thousand dollars. You may as well. Do it it's pretty much like free money. Thank you guys, so much and until next time.