In case you hadn’t noticed, the cryptocurrency market is a volatile one. Today we’re getting into 5 big fat crypto fails. After that, we’ll go over the top events you can trade in the markets this week. Let’s get into some fails. We know you love them.
Ah, OneCoin. This crypto was a certified Ponzi scheme that promised investors high returns with little risk. Sounds almost too good to be true, right? Right! The project was founded by Ruja Ignatova, who claimed that OneCoin was a new type of cryptocurrency that was backed by gold. What could go wrong?
There was (of course) no evidence to support Ignatova’s claim, and OneCoin was eventually revealed to be a major scam. The unfortunate investors that believed her hokum, lost billions of dollars in the collapse. The FBI estimates the scheme to have been worth $4 billion.
Ruja Ignatova went on the run in 2017 and hasn’t been seen since. She’s on the FBI’s most wanted list — quite rightly!
Talking of Ponzi schemes brings us straight to our next flop — Bitconnect.
The project offered investors a way to “mine” Bitconnect tokens, which could then be traded for fiat currency. But, if you smell more than a faint whiff of nonsense, you’re right… Bitconnect was not actually mining anything. It was simply using money from new investors to pay off old investors. The Bitconnect scheme collapsed in 2018. At its height, it achieved a market cap of $3.4 billion.
The founder and CEO, Satish Kumbhani, disappeared in 2022 after being indicted. Indian authorities confirmed in a legal filing last March that Kumbhani had vanished from India and was assumed to have relocated to another, unknown country. Shall we have an article on scammers who disappeared? Comment and tell us!
TheDao was a decentralised autonomous organisation (DAO) that was created on the Ethereum blockchain.
TheDao was designed to be a venture capital fund that would invest in other blockchain projects. Sounds quite neat. But, one major requirement of all businesses operating on the blockchain is ensuring they get their security game in check. TheDao did not do this.
The organisation was hacked in 2016, and investors lost $50 million worth of ether. TheDao was eventually shut down, and the project was a major setback for the Ethereum community.
Terra was a stablecoin project that, like all stablecoins, was designed to maintain a value of $1. The solution used a complex system of algorithmic stablecoins to keep its value stable. Until it suddenly went sideways.
The Terra system collapsed in May 2022, and the value of TerraUSD (UST) dropped to $0.0001… That’s really far from 1 USD! -999900% to be exact.
The collapse of Terra wiped out billions of dollars in value, and it caused a significant sell-off in the cryptocurrency market.
Okay, so 4 and 5 are hard to separate as they’re actually connected to the same scandal, as LUNA was the native token of the Terra ecosystem. LUNA was used to support the value of UST, and it also had its own value. However, the collapse of UST also caused the value of LUNA to plummet.
As mentioned, LUNA’s price dropped from $119 to $0.000001 in just a few days, and investors lost billions of dollars.
So LUNA wasn’t exactly a “Lambo to the moon” kinda crypto!
What can we learn from these crypto failures?
There are a few things that we can learn from these crypto failures:
- Be wary of projects that promise high returns with little risk. These projects are often scams.
- Ask yourself — does this make sense? Then do some research! Make sure you understand the project and its risks.
- Don’t invest more than you can afford to lose. The cryptocurrency market is volatile, and there is always the risk of losing money.
Let us know what you think!
Did you invest in any of these? Perhaps you had a near miss? We’d love to hear your stories. Get in touch at @_contentworks.
Top fundamental events week commencing 14.08.23
Ready for the week ahead? Here’s everything you need to know about.
No specific events are planned.
● JPY — GDP Growth Annualised Prel; GDP Growth Rate QoQ Prel
● AUD — Wage Price Index QoQ; RBA Meeting Minutes
● GBP — Unemployment Rate
● CAD — Inflation Rate YoY
● USD — Retail Sales MoM
● GBP — Inflation Rate YoY
● USD — Building Permits Prel; FOMC Minutes
● JPY — Balance of Trade
● JPY — Inflation Rate YoY
● GBP — Retail Sales MoM
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The Contentworks team