LM portfolio as at 13/05/2022:
| Code | Sector | Date Bought | Cost | Value | Gain/Loss |
|---|---|---|---|---|---|
| LM045 | Gas, Water & Multiutilities | 06/12/2021 | £1280 | £1300 | 1.85% |
| LM047 LM047-2 |
ETC | 17/01/2022 03/03/2022 |
£2530 | £2970 | 17.09% |
| LM050 LM050-2 |
ETC | 29/03/2022 12/04/2022 |
£2530 | £3300 | 30.51% |
This week saw huge falls in cryptocurrencies, particular one so-called stablecoin called TerraUSD and another somewhat related token called Terra.
Coinmarketcap.com stated on Friday "Terra is down 99.93% in the last 24 hours".
While it's awful that some people have lost thousands of dollars, it is very important to remember that these cryptocurrencies aren't backed by anything and so they can collapse at any moment.
Back in the late 90s, during the so-called "dot com boom", one of the world's greatest investors said he wouldn't buy into dot com stocks as he didn't understand them. As it turns out he made the right decision as many collapsed.
Over the past couple of days I've tried to figure out how TerraUSD and Terra (LUNA) work together - or rather, are supposed to work together. I consider myself a reasonably intelligent person but I can't work it out.
From what little I can gather, TerraUSD (UST) is supposed to be worth 1 US dollar. It is "pegged" to the dollar but Coinmarketcap states that "the value of LUNA can also decrease if UST is perceived as unstable".
What appears to have happened is that UST dropped to $0.68 on 09/05/2022 which I guess would make it "unstable" in many people's eyes because it was no longer worth $1.
And due to the way these two currencies are designed to interact, the LUNA price began to drop. Which meant that UST began to drop, dragging LUNA down further. They ended up pulling each other down.
In April 2022 the LUNA price was as high as $116 and today it is down at $0.000243 and UST, the stablecoin that is supposed to be worth $1, is now worth around $0.16.
It's fair to say that these "Terra" cryptocurrencies are looking pretty terminal.
Adding further intrigue to the story, one Twitter user pointed out back in November 2021 that he had worked out how it would be possible to collapse LUNA and theoretically make himself a fortune in the process.
The creator of LUNA was gracious enough to reply to this tweet and described the findings as "probably the most retarded thread ive (sic) read this decade".
You can read more from the original, and very smart, Twitter user who pointed out the issues with LUNA here:
https://twitter.com/FreddieRaynolds/status/1465508806759170050
It isn't clear what has happened to LUNA, or if someone did purposely crash it to make a huge profit but the fact is that there were rumblings almost 6 months ago suggesting this currency could collapse. Someone put forward a scenario where the price quickly fell to zero (or as good as) and the owner chose to call him names instead of reassuring investors.
I guess the lesson to learn is that no matter how sophisticated all this crypto-technology sounds, much of it is backed by nothing and can collapse very, very quickly.
Bitcoin has also taken a bath and is now down more than 50% from its 52 week (and all-time) high of almost $69k which was achieved back in November 2021.
I am not ruling out buying back in to Bitcoin in the future. It would be nice to own 0.05 BTC again to regain what I sold a few months ago after the price dropped below the 200 day SMA.
As for other cryptocurrencies, I'm not interested. This whole episode with LUNA goes to show that if you can't understand it you probably shouldn't be investing in it.