30 – Luna, The Dip & a Wild Week in Crypto – What Crypto Did

Tracey: [00:00:19] Welcome to the Crypto Curious podcast, designed to help you navigate the dynamic world of cryptocurrency. We are here for anyone who is interested in crypto at all. Maybe you've already dipped your toe in the water. Or maybe you don't know anything about it. And this is the very beginning. But we recommend heading back to the early episodes to get your footing. However, if you think you're ready to dive in headfirst, then let's do it. My name's Tracey and as always, I'm joined by my mates from the bamboo app, Blake and Craig. Hey, guys. How you going? 

Blake: [00:00:49] Very well. Thanks, Tracey. How are you? 

Tracey: [00:00:50] Very well. Craig how are you?

Craig: [00:00:52] Going great. Thank you. Unlike the market. But we're still here. 

Tracey: [00:00:56] We are still here. So let's talk about the market this week before we jump into what the news is for the week and what's been happening in the crypto space. Me and the boys want to talk about the current state of the crypto market as a whole because recently we've been getting a few emails from you, our listeners asking about this price decline. And it's not just you guys, but it's also coming up in topics from our friends and our family and our work colleagues. Also wanting to know what exactly is up or should I say down with this market right now. So you hear the headlines saying, you know, cryptos in a bear market and this bear market is an extended low point in a market cycle and that just doesn't have to be the crypto side and market cycle. But that can be a market cycle for things like the share market or the property market. Now we've covered off market cycles in an entire episode and that was back at episode number 15. So go back and give that a listen if you're interested in learning a bit more. But what leads us to these low points that we're in right now where we see both Bitcoin and Ethereum, you know, respectively, down around, you know, 50 to 60% from their all time highs last year. Everyone's got their opinions, you know, and you know, is this just another market cycle or are these different? Blake We'd really like to hear what are your thoughts here? Is this different this time? 

Blake: [00:02:21] There's a famous saying like, This time is different, you know? Whereas yeah, definitely markets tend to have similar patterns over time. And you know, what we've traditionally seen in crypto is a four year cycle. But you know, as the industry matures, the effects of the cycles are going to diminish. Now in the early cycles there were drawdowns of 90%. Now the market's a lot bigger now and yeah, we wouldn't expect to see that same price reduction, but certainly there's a lot of volatility. But volatility is not necessarily a bad thing. I think volatility creates a lot of opportunity for people to make life changing amounts of money. You know, we all hear that story of or know the friend that bought the top of the market and then sold the bottom and, you know, lost 50% of their money. Whereas, you know, if we take these opportunities now to position ourselves, then the outcome could be something very different. 

Tracey: [00:03:22] So what is what's actually pinpointed this big drop? Is there something is there been a catalyst? What's actually happened?

Blake: [00:03:28] Yeah, I think it's obviously not just one thing. It's contributing factors. You know, during COVID, we saw a lot of stimulus in the economy and and as a result, we saw the stock market and the crypto market appreciate substantially in price throughout that time. And and since then since the economy is now trying to deal with the repercussions of that, then, you know, the market's cooling off. And of course, there has been a big event in particular in the last week with one of the major stablecoins has been attacked. And we can, you know, explore in more detail what's happened there. 

Tracey: [00:04:04] Yes. Now, we really we do need to chat about that Stablecoin incident. That's very interesting. But Craig, I want to know what you think about this. You know, you're you're thinking the same way. Is Blake there? And with all these dips, how do we how do we all manage our mental health through this? 

Craig: [00:04:19] Yeah, I do echo Blake's thoughts on the market. You know, we were around in 2019 when Etherium dropped from its 2017 highs all the way down to, you know, 100 bucks. So I think it was a 90% drawdown. So just shows you that markets can be irrational. But to answer your question, Tracey, how do we manage our mental health? I think, you know, looking back in my time, I think it's really important to not give up in these times and just stick to your dollar cost averaging strategy that you've got in place, even if it's just a little bit per week. I remember looking back to the early bamboo users who used our app in the 2019 2020 dips, and they were the ones that were in the best place for the, for the next bull run. So it's. Think keeping your eye on the game and then get to bogged down in the day to day numbers. Are things really important?

Tracey: [00:05:05] Yeah, absolutely. Stick to your conviction. 

Craig: [00:05:07] What are you thinking? Twice about this market? 

Tracey: [00:05:09] Yeah. Look how I'm handling it. I'm just trying not to get too bogged down with the day to day and basically trying to have a look at the market too much. And, you know, and I've been through this before and what I've learnt is, you know, I will get too stressed out if I am checking the market all the time. So just kind of taking a back seat have been through it before and just keeping an eye on things and not getting too bogged down really. As Blake mentioned earlier, there was a big story this week, one of our top ten coins, Luna, has had a massive drop of 98%. Now this coin is somewhat of a stable coin and I for 1 a.m. having great trouble getting my head around exactly what's happened here with this, because there's a lot to be said. So I'm going to throw straight to you, Blake, because you know what's going on here and you can explain exactly what has happened here. 

Blake: [00:05:58] Yeah, for sure. So Terra is a prominent blockchain in the cryptocurrency ecosystem and has two coins. One of the coins is lunar, which is kind of like aether on a etherium. And the second coin that they have is a stable coin. Now, it's not a regular stablecoin backed with US dollars. It was actually backed with lunar and other cryptocurrencies like Bitcoin, Etherium and aaX. Now it looks like that someone's identified a vulnerability in the way that the project is structured and as a result they've found a way to destabilise the project, which has resulted in a, you know, massive decline in price. I think, you know, there's been about $50 billion in total loss of value on the ecosystem. I'm pretty substantial. 

Tracey: [00:06:54] Yeah, that's huge. So I asked you about this yesterday and you were trying to explain this to me and you just kind of did it again then. But you're saying this is a stablecoin that was backed by crypto and not say US state or Australian dollar?

Blake: [00:07:09] Yeah. Not like coins in the bank. It was backed by other cryptocurrencies. So someone it looks like that someone may have borrowed 100,000 bitcoins and then found a vulnerability in the peg. When we say peg, that means, you know, the the Luna Stablecoin should be pegged at $1, but then when it goes below its peg, that means it's broken its peg. And the peg got down to, I think, $0.65 in the dollar. So, you know, you think you have $1, but you only have $0.65. And this all happened over a few days. So someone's found this vulnerability to to peg the stablecoin and by selling, you know, substantial amounts of Bitcoin to, you know, create volatility in the market. And as a result of that, and the Terra project has had to then sell down the Bitcoin and Ethereum that they had backing the lunar stablecoin, which has resulted in a cascading effect that further pushed cryptocurrencies down Bitcoin, Ethereum, but also all cryptocurrencies have followed suit. And I think that the your de Luna token has lost, you know, 98% of its value over the last few days, going from I think $14 billion, maybe even much more. But yeah, it's pretty crazy situation. 

Craig: [00:08:26] It's definitely one of the biggest crashes in crypto history. I think it is the biggest crash. There's been no time where Top Ten has been completely wiped out in the space of less than a week. And also it's quite sad for people involved because people were, you know, using us to get a 20% yield and using them as a savings account, even though they were pretty unrealistic returns that they were getting on the stablecoin. Now they're being wiped out as well. So it's yeah, it's quite a scary time for these investors. 

Blake: [00:08:54] Yeah, for sure. And I think the there's, there's even people on suicide watch now from the community that have so many people have lost so much money from from it. So I think tradition in the traditional financial sector, it's kind of like a a your Lehman Brothers moment where, you know, the bank is has failed and people lose their savings, but in a smaller context, but still nonetheless, pretty harsh.

Craig: [00:09:17] And this is sort of another testament to why, you know, us a bamboo only have bitcoin ETHERIUM Because, you know we're confident that these are going to be around in 10 to 15 years whereas you know this project in the top ten and you would expect it to be have checks and balances in place if this doesn't happen. But yeah, yeah. Even the big ones fall sometimes. 

Blake: [00:09:36] That's right. And we've identified instabilities in, you know, most of the top tens that, you know, has not given us the confidence to, you know, put into the bamboo, particularly with, you know, self-managed super fund product where, you know, it needs these projects need to be around in 20, 30, 40 years. And anything outside Bitcoin and Ethereum just doesn't look like it's going to stand the test of time. Of course, you know, I'd love to be proven wrong and see some of these projects pull through. But, you know, this is new technology and they are trying new and exciting things that hadn't been done before. And there's going to be people that come out and try to test their, you know, ability and strength. And in this situation, you know, it hasn't been able to hold up.

Tracey: [00:10:21] Craig, We did speak about this a bit yesterday, but do you think that Luna can recover from here? 

Craig: [00:10:26] Short answer is I don't know. But there is examples of projects going down 99% and then doing a 500 X. So, you know, this is crypto, after all. And I think one of them was actually land back in the day. Blake Do you remember the lend went down 90% and they turned into AAVE and then did like a crazy return. There's been a few like that and who knows if this could be one of them. 

Blake: [00:10:49] But yeah. 

Tracey: [00:10:50] And you only lose if you sell. 

Blake: [00:10:51] Well, I think, you know, the the model is proven to be, you know, in stable and not a not a great use case for, you know, the technology. So yeah, maybe, maybe it is going to zero so we don't know. Still, we'll be waiting to see and report back on that one. 

Tracey: [00:11:09] And we'll take a break here. And when we come back, we'll talk about the prospect of NFT backed loans. And is it possible that Nfts are moving to Instagram? Welcome back. Now, despite this bear market we've just been speaking about and the turmoil of the markets in the last 24 hours. There are some good news stories going on in this crypto space. There are many out there not fazed or affected by negative price volatility. Some even see it as an opportunity to gain market share from smaller competitors as they collapse. So let's look at some more bullish news that's come out over the past seven days. Crypto lender Nexus issued a $3 million NFT backed loan. This is officially one of the biggest NFT backed loans in crypto history. Two crypto punk zombies were used as collateral for financing the loan. So what does this mean? To push out some jargon there, if you're not sure what a loan backed by an NFT actually is. So this is completely down your alley. Okay, what are we doing? Are we going to see the Commonwealth or ANZ accepting board apes as collateral for our loan now? 

Craig: [00:12:22] I don't think so. But even if it were, I think we're a long way off. But pretty much what it means is if, you know, if Blake had a crypto punk worth 100 Etherium, he doesn't want to sell that crypto punk, but he still wants access to some money. So he he gives, you know, in this case, nexo he gives nexo. He's bought up and says, Can I please have 28? And you can use my crypto as collateral. So if I don't pay you back, you can keep my punk. That's pretty much what it is. But there is a few platforms trying to do this. And I think it's really interesting because for these guys like the Board of Yacht Club who minted these NFT is at 0.5. Etherium Have wrote it all the way up to 100. ethereum And if they want to sell, obviously that creates a taxable event. So, you know, now they have maybe in the future an option to, you know, access some funds using it as collateral without having to sell them. 

Blake: [00:13:20] So you're saying you're saying that if you borrow against your digital assets like your crypto punk, instead of selling it down, it wouldn't create a capital gains taxable event. And therefore, it's a tax efficient way of creating liquidity off your investments. 

Craig: [00:13:37] I hope that's right. But I'm not a tax I'm not a tax expert. 

Tracey: [00:13:41] Is that right? That's that's very interesting. Is that are you are you.

Craig: [00:13:46] Well, that's the that's the use case, right. You don't have to sell your your asset to get access to liquidity. Of course you have to pay it back. But like. 

Tracey: [00:13:54] Yeah, that's another question to bring up on our tax special when we have one. Interesting. Okay. So does anyone else know? Are there others out there aside from Nick. So doing this then, Craig, you mentioned some others. 

Craig: [00:14:06] Yeah, there's a few. There's one called Jay Pegged. You know, I think they got like ten punks. And I think one of them actually, they took the punk as one and didn't pay him back or the the floor dropped or something. But there's a bunch trying to do it. But you know, the other question as well as if, you know, you have a board over asset that's 100 Etherium, are you really going to trust the protocol to, you know, to put that into? That's a whole nother issue as well. 

Tracey: [00:14:29] But it all seems quite unregulated, still. 

Craig: [00:14:31] Very early days, I think, on this one. Chase. 

Tracey: [00:14:33] Some more bullish news in the NFT space and this one is really interesting is involving Instagram. Instagram could be adding Nfts into their platform very soon. Instagram users will be able to plug in their wallets, prove NFT ownership, showcase them on their profiles, and tag the creators who made them Metters even hinted that potentially being able to mint nfts on Instagram and Facebook in the future. So Mark Zuckerberg announced all of this in the hope to allow NFT creators to take control of their work and fan base and even income. So I think this is the first in many steps that it will be taken to integrate more web3 initiatives on their platform. Are you on board with this, Craig, and where do you think this integration will come? You know, will they have Salon or a Etherium polygon? How will it work? 

Craig: [00:15:26] I like it. I think it obviously suits Instagram a lot since it's a photo sharing platform where, you know, you post a new car, post a new watch, now you be able to post your NFT tagged the creator. And I think it's a much better suit. As we know, we've spoken out in the past. Twitter have already done this. So I'm guessing they'll be taking a few, you know, cheats from Twitter where Twitter's model is. You know, you change your profile picture and it links with your wallet and then you just sign it off. I suspect this might be a similar way of working, but I think Instagram is much better suited rather than Twitter. 

Tracey: [00:16:01] Can I actually ask can you go back because I. Is that how it works with Twitter?

Craig: [00:16:05] Yes. So at the moment on Twitter, you have to get the premium version, which I think it's a few bucks a month. Okay. And then you yeah, you change your profile picture and it like says, you know, link with your wallet, sign it off. Yeah. Then you can choose which asset you. It's your profile picture and it actually shows as a hexagon rather than a circle. 

Tracey: [00:16:24] So that's what I've been going on about. So if it's a hexagon, it's showing that it's really your NFT. 

Craig: [00:16:29] Exactly right. Yeah. 

Tracey: [00:16:31] Okay. 

Craig: [00:16:32] But I think it's probably better suited to Instagram for, you know, mainstream usage because, you know, who's the artist that you love, Tracey. But didn't nft drop Valerie? They're free now. You can, you know, show that off your Instagram tag. Alphari. Yeah, I can get credited, so I think that's cool. 

Tracey: [00:16:48] Yeah, I love that. And the fact that you've just said education, that's the whole problem specifically with that Valerie Droppers, because they're coming from Web two and it doesn't translate. She's got a million followers who love her and love everything she does, but couldn't quite understand this whole Web3 thing and nfts. And it's all about education, which is for me, what this this means. I think that, you know, there's still so many people that don't even know how to purchase an NFT and with Metamask understanding how to actually open a METAMASK. And, you know, there's so many things with scams and things that can go wrong. I think it might be kind of the onus might be on, you know, media and Instagram here to educate their users on the nuances of web3. You know, are you kind of following that train of thought blame?

Blake: [00:17:31] Yeah. No, it's definitely great that a mainstream platform like that is integrating the technology. And I think, you know, there's really interesting features and functionality that they can start building upon that. For example, you know, if you're a photographer and you post a photo on to Instagram, you could have, you know, the contract addressed of the NFT attached to it. So then whenever it's RESHARED, for example, people can always trace it back to the creator. And, you know, there's all sorts of things that they can do. So I think it's a it's a great use case. 

Tracey: [00:18:07] So do you think, you know, having so many more people involved and through such a big platform is going to do anything with the gas fees? 

Craig: [00:18:15] That's a really good question. So if you think about a gas fee now, a gas fees when you, you know, transact with another wallet, whereas if you're just showing off your NFT with your Instagram profile, you just verifying that you own it. So it's not necessarily there necessarily won't be a gas fee associated with that. It's when you bring up the trading. Blake What is that right? 

Blake: [00:18:35] Yeah, that's exactly right. And there's actually some new technology that's being built called Ipfs Intergalactic Planetary File Sharing System. And it uses this concept of instead of, you know, copying an image when your us send you a picture of a meme via email there being one copy on my computer and then another copy on yours. Craig Instead, this ipfs means that you would have one source of that image that would be held in a decentralised database, and we both view it, and that creates a lot of efficiencies on the Internet. So yeah, technology that we're going to see a lot more of in the coming years. 

Tracey: [00:19:18] I just think overall it's really bullish news for NFT space. So I think it's nice to round out our episode this week with some bullish news after the markets have, you know, had a little bit of a nosedive. So let's leave it there, guys. And we love hearing from you, our listeners, so please keep emailing us at our email podcast at Get Bamboo Dot IO and follow us on social media and make sure you hit the follow button whenever you're listening to us like right now so you don't miss an episode and get notified every time we release a new one. We'd also love you to share the podcast with your friends and family. We know there are a lot of crypto curious people out there, so please send them our way. If they're wondering what's happening in the market today, you can actually send them a copy of this episode, copy and paste the link and send them on. And don't forget to rate and review the podcast in your app. Thanks for listening and we hope that you will join us next week. Bye for now.