Did Someone Deliberately Attack Terra/Luna to Kick off a Death Spiral? - Ep.351

Transcript

[Music] hi everyone welcome to unchained you're a no hype resource for all things crypto i'm your host laura shin author of the kryptopians i started covering crypto seven years ago and as the senior editor of forbes was the first mainstream media reporter to cover cryptocurrency full-time this is the may 13 2022 episode of unchained point change is the easiest way to earn passive income using crypto you can safely deposit cash or cryptocurrencies to earn up to 20 percent annual yield there is no lending or market risk just simple high return yield farming create an account today at tri-d5.cc unc

and receive 40 usdc that's try d5.cc unc with the crypto.com app you can buy earn and spend crypto in one place download with the code laura link in the description today's guest is john woo head of growth at aztec network welcome john thanks laura happy to be here just a heads up everyone that the news we're covering here is so important that this may be longer than the traditional friday show one additional note is that if you haven't yet listened to the interview i did with kevin joe on of galwa capital ontario uh which came out april 8th i would also

suggest you do that as background and for those of you who happen to catch this when it comes out i would also urge you to check out a live stream that i'm doing on the unchained youtube channel at 11 30 a.m eastern with nick carter eric wall and eric voorhees and we are going to dive into all things tara i am recording this for next tuesday show but obviously because events are happening so quickly i felt it was best just to live stream it so that it wouldn't be outdated by tuesday all right so now we're going to dive into this interview with john who is going to give us the deal on everything that happened this week this has been an extremely dramatic week in the crypto markets particularly around the stable coin terra or ust

and the value of tara is supposed to stay pegged to the us dollar back in april luna which is the token that governs tara's ecosystem and helps keep ust at one dollar hit an all-time high of 116 as of thursday morning eastern time it was trading at around one cent i actually wasn't able to check it right before we started recovering recording but i imagine it's even lower tara itself um when i wrote this a few hours ago was about 59 cents uh which is higher than it has been at other times this week honestly um it's really just looked like the whole ecosystem is on the verge of collapse um things at the moment that we're

recording um yeah are just very up in the air in that regard but john wrote an amazing tweet thread explaining everything that's happened so before we even just get into how the whole de-pegging incident happened let's just make sure everyone understands the roles of all the main assets in this ecosystem and all the different entities at play and you know here i'm talking about things like luna terra ust etc so john why don't you take it away and give us this this background for context yeah so i think i'm gonna be a little bit of a trad five bro and i'm gonna try to analogize the whole ecosystem to visa because that is what terra was meant to be terra is a blockchain meant to be a stablecoin payments platform so a

replacement for a conventional payments platform like visa but decentralized and it supported multiple fiat-backed stablecoins and it had real-world adoption with partners like chai which is essentially venmo right so the same way venmo um can work with credit card platforms um ust and taro is working with china and that's a korean based startup right exactly a korean based mobile payment startup and so ust you can think of like visa coin it's like a coin that's representative and supposed to be valued at a dollar and it's the proprietary currency of the tarot ecosystem so one ust is supposed to be pegged to one dollar luna you can kind of think of as like shares in visa

it can be staked in the ecosystem and that allows validators to process transactions on the platform so the same way visa has payments processors that process the transactions on the network for visa terra and ust also had these validators who have to own shares of luna have to own luna tokens in order to earn processing fees network transaction fees now there's another wrinkle here which is that the values of luna and ust were linked and the way that that works is essentially ust can always be redeemed for one dollars worth of luna so to kind of continue extending the visa analogy if i had a visa coin at any time visa

says you can exchange your one visa coin for one dollar worth of visa shares and that's kind of how it works now those are kind of like the token primitives that we're talking about and how the network works but it's worthwhile talking about two more entities here that you might have heard of anchor and luna foundation guard anchor is a high yield savings account and so think if visacoin said hey you know if you buy visacoin you can put visacoin into the high-yield visa savings account and what anker did was pay anyone with ust 20 on their ust deposits so if i have a dollar of ust i put it into anchor at the end of the year i'll have a dollar and 20 cents

luna foundation guard you can think of as some combination of like the fed and the fdic in this like extended traditional finance analogy so some combination of like an insurer and a backstop for anchor which is the checking and savings account that makes sure that any bank run gets stopped and kind of like a fed type interest rate policy setter not only dictating kind of the rate of anchor but how many funds were put into anchor to prop it up and to make sure that depositors got their 20 um and also ultimately kind of a lender or a source of capital of last resort so in case something goes wrong with the ecosystem

luna foundation guard um acronym lfg not a coincidence would step in and backstop depositors okay so um you already described basically kind of like how it was that luna would help ust keep its peg um so i'm gonna actually uh just maybe get to what the crux of the issue was here and i'm gonna reference a tweet that you gave or that you wrote which um just a heads up for listeners it's a little bit vulgar um but you wrote and just by the way so the luna foundation guard is the number two in in this tweet

so you wrote ust is stabilized by one contracts and two the gigantic gravity well created by the size of do quan's nuts so why did you describe luna foundation guard that way well luna foundation guard is a small centralized committee of human actors right similarly like the fed board or any other centralized policy maker or the fdic and ultimately it was formed and governed at the discretion of dokuan the founder of tara and there was this whole cult of personality trust and faith around dokwan not dissimilar from our you know cult of personality trust and faith in uh fed chairs like jerome powell um there's this understanding that when

you know things hit the fan that the luna foundation garden dokuan specifically will do everything it takes everything that's necessary to raise the funds necessary to make depositors and stakeholder ecosystem stakeholders whole and so when i kind of say you know the ecosystem was was governed by two things one there is an algorithmic component that keeps ust pegged to the one dollar value but in the case things go horribly horribly wrong there is a human committee headed by dokwan uh secured by the size of his nut so to speak um who will step in and ensure that things don't spiral out of control now of course they did ultimately and we can talk about how that happened but that's

in theory why the lfg existed yeah so before we actually get there let's just reference a previous moment in time when something similar to this event actually happened and you mentioned this in your tweet thread it's it involves something something called d-gen box tell us what happened there so this is a whole other stable coin ecosystem um called abracadabra um that was headed by a controversial founder by the name of daniella sesta and a talented developer who created you know a multi-billion dollar defy ecosystem abracadabra was a core component of that ecosystem and what abracadabra is is a money market lending protocol

that allows you to withdraw stable coin loans backed by uh essentially interest bearing assets and so let's double click on that an interest-bearing asset is like a bond it's like something that's worth a par value like a dollar but you expect it to pay you more over time and so the beauty of this specific platform was your collateral increases in value over time kind of similar if i were to analogize it again to some trad by example like getting a mortgage on your house you get a mortgage on your house and you draw a loan that's fixed in value and the hope is the value of the house goes up over time and so even though you owe the same amount of money

the value of the underlying collateral has gone up now what's d gen box d-gen box was a partnership or you could you could argue as a way to take advantage of anchors fixed yields so anchor was paying everyone 20 per year now the obvious question is something's paying you 20 per year and you can borrow money for less than 20 per year then why can't i borrow money at 5 or 10 percent and get my 20 and lever up the position so to speak and make it pay me something closer to a hundred percent so that is what d gen box was d gen box allowed for people to use a token called a ust ausd is interest bearing usc remember that ust pays you 20 percent

per year and so if you have a token that represents your deposit in ust it will accrue 20 to it every single year you put that in as collateral to abracadabra and you mint abracadabra stable coin called mim now you take the mim you swap it for tara's ust and you repeat the cycle you deposit the ust you get aust you mint mim and you trade it for ust this allowed for something called recursive lending right so if if you were only able to get 50 leverage on the first trade you would do it again and then you'd have 75 leverage do it again you'd have 87 leverage etc and so that allowed people to

recursively create these highly leveraged positions on anchor protocol and that means of course the danger with leverage is let's say you're 10 times levered you have 10 times more debt than equity in your position if the asset value falls by ten percent you will be liquidated and what liquidation means is the money market protocol average cadaver in this case is going to take your collateral and sell it on your behalf in order to recover your position and ensure there's no bad debt and so this is no different from a foreclosure what is a foreclosure you go to the bank and you say i can't make my payments and the bank says well that's too bad you owe us a lot of money thankfully i've got all this collateral in the form of your house so i'm gonna

go sell your house so that we can recover the bad debt that you took out so what happened with this recursive lending cycle on abracadabra is someone got spooked dumped a bunch of ust ust d-pegged and because ustd pegged some of the under all the underlying collateral in the d-gen box strategy is denominated in ust remember that aust that kind of looks like a ust bond so once the price of that starts coming down positions begin getting liquidated and now the problem with this liquidation loop is when the ust gets liquidated more usc gets sold and then the ust price comes down more and it causes even more liquidations

and this is what's called uh cascading liquidation and it caused a rapid depending of ust and led to a form of the death spiral that drags luna down that we'll explore you know in in this week's case all right so in a moment we are going to talk about the deep hecking that happened over this past week but first a quick word from the sponsors who make this show possible join over 10 million people using crypto.com the easiest place to buy earn and spend over 150 cryptocurrencies spend your crypto anywhere using the crypto.com visa card get up to eight percent cashback instantly plus 100 rebates for your netflix spotify and amazon prime subscriptions download the

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unc to receive 40 usdc that's try d5 dot cc slash unc back to my conversation with john so now let's dig into what happened starting last weekend what happened to kick off this dpeg so there's been a lot of on-chain analysis there's this twitter user named onshane wizard who had a great summary of it and this is what the consensus feels like happened which was an actor who wanted uh to expose the vulnerability in the terror ecosystem now what makes this all confusing is that they actually did it seemingly through a bitcoin short and it's worth explaining why bitcoin comes into play

and why we think ust is dragging down the entire market right now just a quick note here that in this next little stretch we discuss a potential malicious attacker there are a few assertions here that are not verified but speculated first that there is a malicious attacker second that this entity opened a bitcoin short third that it sold bitcoin to the lfg and fourth that it profited from the short again none of this is confirmed what happened was after this d-gen vox strategy unwound and hurt luna very badly luna i think intelligently said we need to figure out a way that there isn't a death spiral so the

death spiral happens when ust d-pegs and then people redeem their usd for luna and sell it and then the luna price falls very rapidly and so they said what if we actually traded some of our luna for hard collateral so hard collateral meaning something whose value we all recognize so the luna foundation guard very publicly decided to start buying bitcoin with their luna now what the goal of this was is it made it so that a dollar of ust was no longer just backed by one dollar luna it was backed by 20 cents of bitcoin and 80 cents of luna the idea is instead of selling into luna and

creating a death spiral the first 20 percent of depositors would actually sell and or redeem into bitcoin and they would be much happier getting bitcoin than luna supposedly and it wouldn't kick off this very very bad downward loop so they bought on the order of 2.6 billion dollars of bitcoin over a period of time over the counter with major market makers and and the goal was to stabilize the ecosystem and give people more confidence that luna could not d-peg because it was backed at least partially by hard collateral so it seems like the trade that this actor made was actually to short bitcoin so they open a gigantic multi-billion

dollar short position in bitcoin and the genius here is they started opening the short selling the bitcoin to dokwan and the lfg and so the way a short works of course is you borrow an asset and then you sell it immediately and then later you have to repurchase the asset to repay your loan so the goal is to sell high first and then buy low later so just to stop you for a second i just want to make sure so all of this is verified because the way that i read this i wasn't completely sure if all of this was verified yes so there is on chain evidence that this happened it's not clear that it's a single actor it could all be disconnected but there is on-chain evidence that these things were happening and we can see it all unfolding

um uh that that is my understanding so um the short was opened a multi-billion dollar short was opened and then it was sold to lfg as they were buying bitcoin and so they were the lfg is accumulating bitcoin meanwhile this bad actor is selling bitcoin and accumulating ust now why would you want to accumulate ust um isn't that supporting the tarot ecosystem well when you purchase it when the system is stable you can kind of buy one dollar of ust with one dollar of usdc now the goal after is to destabilize the system by selling it back in so

to add some more flavor the lfg the luna foundation guard was planning to transition liquidity venues essentially the place where ust is traded on a platform called curve and in in order to prepare for a transition from one trading venue to another they withdrew a bunch of liquidity from the first trading venue and that's the three pool three pool ust pool now the liquidity in that pool became a lot lower meaning there could be much more price impact for traders trading in that pool the attacker then took the opportunity to dump a bunch of ust into this curve pool and buy up all the usdc usdt and die which are the other assets

the tldr of all of that action is to make sure there's no on-chain exit there's no way for ust holders to get out on an on-chain liquidity venue because they did that ust depect and we know in usd pegs things start going poorly but this is where the bitcoin comes in this time when the ustd pegged the lfg tried to defend the peg by selling bitcoin now this is exactly what the attacker would want because if i'm short bitcoin i want everyone else to sell bitcoin and make the price of bitcoin go go down ultimately what happened was it caused enough of a panic that people started to

swap ust for luna and dump luna depressing both the price of ust and luna and initiating the death spiral meanwhile the lfg was furiously liquidating their bitcoin position in order to try to backstop ust selling bitcoin and buying ust to try to keep the peg up and ultimately obviously the on-chain sleuths will have their day trying to figure this out it looks like the attacker made away with about a billion dollars but a billion dollars tied to a bitcoin short not shorting the luna ecosystem and so that's basically how it went down yeah one other point that you made in your

um tweet thread was that when the luna foundation guard had been buying their bitcoin they'd been dollar cost averaging at a price that's higher than 40 40 000 and obviously recently bitcoin's been more um like in the 30 000 range and actually at the moment we're recording we're in the uh high 20 000 range so um that meant that when the luna foundation guard was selling its bitcoin it was doing so at a loss um so let's just talk about what has happened to the price of ust and luna this week um obviously day to day it was quite the story but why don't you give a short recap of that for people yeah the long story short was the attack

seemed to have happened initiated over the weekend and it was just enough on saturday and it was enough to spook investors going into monday and as recently as over the weekend you know dokwan the lfg friendly actors within the terra ecosystem were still kind of pooh-poohing the risk because as we've seen before last may and then you know this february there have been many attacks on luna's peg and i think that's why dokwan has had such a reputation as a founder because the lfg have successfully defended ust many times before so it looked like this was just another time to defend ust's peg unfortunately it was bad enough this

time and with that kind of like awful you know bitcoin pressure um that ust lost its peg and right now it looks like given the panic wider panic in the market ust is down to about 50 cents or 60 cents and luna's basically at zero dollars and actually as of this recording a couple hours ago the luna the terra chain the entire blockchain was halted and they've stopped producing new blocks and processing transactions um so it's been a tough week um yes to say the least before that they actually had also published a governance proposal to speed

up the rate at which ust was being burned and then to also increase the pool size to as they put it expel the system's bad debt what was your take on that proposal and and then actually just to finish out the reason that they say they um well it's not clear they said that the system was halted they didn't say who uh who halted it but um they you know said that basically the reason they were doing that was because luna had gotten so cheap that then it would be very inexpensive to do a governance attack uh which you know because of this proposal um was was an attack vector so you know what's your take both on the proposal um whether or not that would succeed and then even now this halting of the

blockchain yeah let's talk about both the first is i'll use an analogy that i used with uh mccormick who writes not boring i wrote a guest post for him about um a cage full of screaming monkeys so think about uh this cage being um ust it's a bunch of apes who hold ust and they're getting 20 per year to hold usd now all of a sudden one ape leaves the cage because he's not really confident he doesn't feel comfortable in the cage he leaves now in this analogy once all the monkeys leave the cage the system collapses so let's just use let's just hand wave that

part of the analogy um well the other monkeys are still feel pretty confident and and they're staying in there and getting their 20 but then a couple more leave and now panic starts to set in the monkeys start to feel like wait why are we in here maybe we should get out too maybe it's not comfortable in here maybe i should maybe i 20 is not worth it and the luna foundation had already foreseen this and they had a policy lever that essentially rate limited the amount of exits so you can think of this as like a turn style for the cage like three monkeys can exit a day and once three monkeys exit the turn style stops and everyone has to stay in until the next day roughly something like that some kind of gas pedal rate limiter

well what happens then you watch a monkey walk out and you go hmm i think i'd like to go out and you go to the turn style you push it and it locks in place and you know the the document and the lfg say sorry those are the only monkeys that can leave well that causes even more panic that causes even more willingness to leave oh my god i might not be able to get out and so the cell pressure builds inside the cage but it can't be released that's what we mean by kind of letting out the toxic bad debt there's lots of monkeys that want to leave now the problem is this build pressure has grown inside usd holders they all want to get out there's not enough liquidity there's not enough good collateral to compensate

these people the you know luna's market cap is now down to 300 million dollars and it's falling precipitously with every minute because remember every ust that's redeemed for luna pushes the price of luna down even further and so they're in a very difficult situation where the proposal is to say take away the turnstile let as monk many monkeys out as they as want to get out but if you do that luna for sure just goes to zero dollars immediately because everyone will want to redeem but if you lock the cage and you keep them in they scream ever more loudly and even more panic sets in so it's a nearly impossible situation and i would say that if i had to predict

anything it feels like the system needs to be reset or rebooted and luna holders need to get wiped out to compensate as many ust holders as humanly possible and then it might be a full reset oh wow and then just are you saying that you think that that might actually succeed in helping the system kind of reach some sort of equilibrium if not like a full you know re-pegging back at one dollar i have a hard time believing it will reach equilibrium because there is so much asymmetric cell pressure for both assets ust and luna right now there and there isn't enough hard collateral there's zero hard collateral it's all gone the bitcoin has already

been sold in a last-ditch attempt to save ust and so maybe to touch on your point before about the chain stopping the reason why the chain stops is because the validators have to put luna steak in as essentially a collateral or a down payment in order to have the right to operate the system now if they don't operate the system effectively just like if a visa processor processes a fake or fraudulent transaction their deposit their state gets slashed now if the stake is worth close to zero now it doesn't really matter if i get slashed so there's very little disincentive for me not to put in bad or fraudulent transactions and that's why they had to

halt the chain because otherwise anyone could go in be a validator put up a marginal amount of dollars to qualify and then be able to spam the network put in false transactions be fraudulent um and so they had to do it for the security of the network okay and so the way that you've been talking it sounds like you think that this was a deliberate attack and and i just want to verify so have you seen the unchained evidence about the bitcoin shorts i am relying on ether scan and people things that people are quoting um it's not clear whether this is you know how deep the level of coordination

is but it looks like there is on-chain evidence of roughly this story roughly this narrative and so um one other piece of that is that people have been saying that this was timed to when um there was i guess liquidity taken out of what was it luna or bitcoin or something in order to uh uh kind of see the four pool uh that they were creating in order to basically shore up the um this system is that can you talk a little bit about that yes correct and so this is something that the luna foundation guard had messaged to people hey we're withdrawing liquidity from our

primary liquidity venue in preparation for transitioning this was public it was you know widely known that this was going to happen and so it was in either case it would have been known because it was on chain but it was very it was published widely and so it might have been a gift to an adversarial actor who said you know they had already anticipated this liquidity to be a vulnerability a weakness as they were transitioning and executing that timing does not seem to be a coincidence now the runaway effects luna getting pushed close to zero um ust deeply de-pegging you know widespread market panic

um contagion into the bitcoin market and the crypto markets as a whole i'm not certain that an actor could have foreseen how far it could have gone because these recursive runaway effects are hard to predict but it does seem likely that this was an adversarial actor because of the amount of liquidity and the amount of on-chain action that happened and that had to have happened to destabilize ust to this degree okay just one comment i do want to add here which is that i did reach out to kevin joe again of galwa capital and i asked him what he thought of that theory and he did say that you know there is a possibility also that it was not a deliberate attack that

somebody just noticed that the liquidity was low and panicked and um sold and that that could have also set this off that it's not neces you know we can't know obviously because we don't know who did this and we don't know um what they were thinking but that was another theory that he had that would be you know again against kind of what a lot of the speculation the direction that a lot of speculation is going for sure i think ultimately we can't point fingers at any one entity or even say that it was 100 deliberate um but i think we can say for sure that the system experienced a moment of fragility that whether intentional or not was exploited all right and then the last question i

have for you is that now i've seen so much chatter about staked eath and bonded eath being in this system and i don't know can you just explain what that is and what the risks are then to i guess ethereum i don't think that there are any risks to ethereum um i believe the connection is lido published something today telling their liquid stakers so lido provides a service where recall that you know you could have staked um you could have staked luna in order to earn staking yields essentially providing proof of stake to the network to validate the system's integrity they provide that service to people so

instead of you having to set up the whole infrastructure you give them luna they stake it on your behalf and then they charge you a staking fee and they return you a liquid staking token lido had announced to their users that they should withdraw from the terror ecosystem because the chain was becoming unsecured because the price of luna was falling and they could no get no longer guarantee the integrity of the network which was ultimately borne out when the system halted and so i can't say for certain but in times of panic people make these kind of associations and they see that lydo is questioning the integrity of luna and perhaps people are wondering should i be questioning the integrity of lido and if i'm questioning the

integrity of lido should i be questioning the integrity of all the staking protocols should i be questioning the integrity of liquid state eath should white should i be questioning the integrity of steak teeth should i be you know questioning ethereum itself okay but you don't think that there's any risk i do not believe there's a direct contagion to the ether token this is very much um a defy or i would say kind of app player consideration in terms of like the the pricing that's going on in ust and these curve pools um there's obviously widespread market panic in contagion right now um and as we know all of these things are highly correlated and interlinked but i

don't believe there's a systemic risk to ethereum at all all right so if i were to kind of force you to place odds on what happens to tara from here on out what would you say um i would say that it makes a lot of sense to me that they try to make as many ust holders whole as possible given however much luna is liquidity is left to compensate them and if i were to guess that means luna equity holders luna token holders are going to get completely wiped out and the system can be reconstructed with fresh capital i mean the contracts are still the contracts the system can be rebooted

but perhaps under a new brand perhaps under a new founder perhaps with new investors um so if i were to guess you know some proportion of usc holders will be made whole zero luna holders will be made whole um and and then we'll we'll move on i guess wow i i i'm a little bit incredulous that you're not saying this is the end of the algorithmic stable coin and are you saying that you feel that if they've been able to carry out their full plan with four pool and everything else that then it might have worked or what what's your what are yours or you're just saying that this is not real this is no there's no verdict here on algorithmic stable coins or yeah why are you saying this

i'm really surprised yeah i'll tell you why um because the algorithmic stablecoin is a holy grail if you think about what an undercollateralized algorithmic stablecoin is it is printing money out of thin air there will always be capital chasing that dream in my opinion we have seen this over and over again with ust with iron titan with fey which launched as an under collateralized protocol but is now over collateralized and there are over collateralized stablecoin protocols and one-to-one collateralized centralized stable coins that just work usdc die they kind of just work but they're not very exciting

i'll tell you why they're not very exciting you know if in order to mint a die you need to put two dollars of collateral in to get one dollar of die out in order to mint a ust as of a couple weeks ago you needed to put 20 cents of bitcoin in so two dollars to 20 cents it's 10 times more capital efficient to have ust now if i'm a venture capitalist or any capital provider i'm looking at this and i'm saying i can create a monetary system that's 10 times more capital efficient than the alternative i'm willing to chase that dream over and over and over again collectively i think as an ecosystem we've shown that we're willing to chase that dream over and over again and risk

systemic toxicity in defy markets and i totally understand why because if you can get to a place where you have an alternative to the us dollar which is backed by nothing but faith alone i mean truly have you not created something of immense value by putting very little money in wow okay okay i know a lot of regulators listen to my show so i if you're a regulator and you want to opine on what what's been said on the show please reach out to me because i'm i'm really really really curious um but anyway this has been so incredibly fascinating and thank you so much for your very clear and detailed

explanations i really appreciate it it's been wonderful having you and on unchained of course laura thanks for having me don't forget next up is the weekly news recap stick around for this week in crypto after this short break thanks for tuning in to this week's news recap bitcoin below 26k after inflation report in addition to the luna chaos crypto was also hit by an unexpectedly high inflation number causing prices to stumble on wednesday the bureau of labor statistics reported that the consumer price index was up 8.3 in the 12 months ending in april

in the days after the cpi numbers came out bitcoin and eth hit a low of 25 200 and 1748 dollars respectively though it is not certain that the inflation report caused the dip in addition to bitcoin and eth struggling in the wake of high inflation and the terra bank run tether or usdt the 150 billion stablecoin was briefly knocked off its peg on thursday and fell to 98 cents bitcoin eth and usdt were certainly not the only crypto assets to be affected by the terra and cpi numbers in total over 440 billion dollars in value was wiped out in terms of market capitalization from the crypto industry data from coin

market cap shows furthermore nearly four billion dollars in short and long positions were liquidated this week reports coin glass nft prices went down heavily as well the floor price of board api club has gone down 25 over this week and crypto punk's floor price suffered a drawdown of 15 considering that these nfts are priced in eth and the eth price plummeted in relation to usd the loss is much higher than 25 percent and 15 ral pal ceo of global macro investor says a recession is coming and that crypto is in full panic mode however he compared the fear people are feeling now with the sentiment of march 2020 which led to a major bull run he pointed out that tough

times like these are a time to buy on the other hand peter schiff the famously anti-crypto economist unsurprisingly recommends that people sell their bitcoin selling now is not panicking it's smart to cut and run he said on twitter instagram introduces nfts this week instagram launched its nft pilot in which selectus creators and collectors will be able to share nfts that they have created or bought disclosure i write a bulletin newsletter for its parent company meta according to instagram head adam moseri enabling nfts offers new ways for creators to earn money from their content through nfts artists musicians and creators will be able to tokenize their work and verify ownership of it i want to acknowledge upfront that nfts

and blockchain technologies are all about distributing trust and distributing power merceri said in his announcement but instagram is fundamentally a centralized platform so there's the tension there instagram nfts will first support ethereum and polygon executives hinted that flow and solano will be coming soon ryan watt ceo of polygon studios said on twitter that facebook chose polygon due to polygon's carbon neutral footprint its scalability and the developer ecosystem meta ceo mark zuckerberg commented meta plans to bring nfts to apps in our family similar functionality is coming to facebook soon along with augmented realities and nfts on instagram stories via spark ar so you can place digital art into physical spaces

microstrategy's bitcoin backed loans won't be margin called anytime soon michael saylor founder and ceo of microstrategy the publicly traded software firm known for its large amount of bitcoin holdings shed light on the company's obligations concerning its bitcoin-backed loans he tweeted microstrategy has a 205 million dollar term loan and needs to maintain 410 million dollars as collateral meaning that the liquidation price of the company's bitcoin loans is 3562 however even if btc reaches that price sailor assured the space that he is ready to put up other collateral such as company stock or assets so that he doesn't have to sell btc microstrategy holds 129 128 bitcoin which at current

prices is valued at more than 3 billion the firm's average buy price for its bitcoin holdings is thirty thousand seven hundred dollars even though it is clear that it doesn't plan to sell considering bitcoin's current price the firm has an unrealized loss of roughly 330 million dollars on its investment treasury secretary janet yellen asked for new stable coin legislation by the end of this year on the same day tara usd or usdt started depending she even referred to the ust stumble in her speech i think that ust simply illustrates that this is a rapidly growing product and that there are risks to financial stability ms yellen said at a hearing on tuesday before the senate banking committee she also added we need a coherent federal framework

when asked by pennsylvania senator pat toomey if the goal was to get the legislation done during 2022 mazzaglian responded that she thinks it would be highly appropriate in addition in her written testimony yellen said that she has been working on identifying the risks that digital assets impose on financial stability however after being questioned by representative jim hymes in a hearing before the house financial services committee yellen recognized that the stable coin market has not yet reached a size big enough to impose a major risk on the financial system el salvador bought the dip on monday el salvador's president nayu bukheli tweeted that his country just bought the dip according to bukheli the country purchased 500 coins at an average usd

price of thirty thousand seven hundred and forty four dollars bloomberg reports the government has purchased two thousand three hundred and one bitcoins since september with monday's acquisition being the largest since it started buying the cost of all these purchases combined is approximately 103 million dollars at the current price the bitcoin held by el salvador is now worth 70 million dollars which translates to a 32 percent unrealized loss so far mckelly has earned himself a lot of attention since he decided to adopt bitcoin as legal tender in his country last september plenty of skeptics think his decision was not wise for example the international monetary fund has been at buchelli's back to reverse his decision in january an imf report urged

authorities to remove bitcoin status as legal money imf directors stressed that there are large risks associated with the use of bitcoin on financial stability financial integrity and consumer protection as well as the associated fiscal contingent liabilities coinbase's earnings report reveals a new risk disclosure coinbase the largest cryptocurrency exchange in the united states by trading volume revealed that user crypto assets might remain as the company's property in the event the exchange files for bankruptcy this disclosure was included in its first quarter earnings report as one of the risk factors of using the platform because custodially held crypto assets may be considered to be the property of

a bankruptcy estate in the event of a bankruptcy the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors the exchange road however according to ceo brian armstrong user funds are not at risk at this very moment the funds are safe at coinbase just as they've always been he tweeted and he added we believe our prime and custody customers have strong legal protections in their terms of service that protects their assets even in a black swan event like this at the end of his statement he reminded people about coinbase wallet the usage of which would not run that risk

we offer a self-custodial wallet solution for those who prefer to store their own crypto as for the rest of coinbase's earnings report it appeared to be a tough q1 coinbase reported a loss of 430 million dollars and a 90 drop in monthly users that had a very negative effect on the company's stock coin by thursday it was trading at around fifty six dollars a fifty percent drawdown in less than a week google is going web3 according to cnbc google is putting together a web3 team to build services for developers running blockchain applications it appears that google intends to not fall behind on the web3 curve and will try to capitalize on the searching popularity of cryptocurrencies and

blockchain projects last friday google cloud vice president ahmet zavery told employees in an email while the world is still in its early embrace of web3 it is a market that is already demonstrating tremendous potential with many customers asking us to increase our support for web3 and crypto related technologies instead of building projects of their own it seems that google's strategy to enter the crypto space is to support developers by offering them tools to build their own applications and projects james tromans a former citigroup executive who arrived at google in 2019 will lead the product and engineering group and report to xavery google joins meta twitter nike and other

corporations in an attempt to capitalize on the web3 opportunity time for fun bits madonna launches nft collection with beeple madonna in collaboration with digital artist people announced the release of her first nft collection the three video nft features a cgi madonna giving birth which is the reason they called it mother of creation she is giving birth to nfts we set out to create something that is absolutely and utterly connected to the idea of creation said madonna in an up in a video uploaded on twitter i am doing what women have been doing since the beginning of time she added the auction for the mother of creation triptych went live on wednesday and will end on friday the proceeds will go to three

organizations national bailout v-day and voices of children the collection has three videos which are called mother of technology mother of evolution and mother of nature as of thursday they are priced at 14 8 or around twenty six thousand dollars ten eighth or nineteen thousand dollars fifteen eighth or twenty nine thousand dollars respectively thanks so much for joining us today to learn more about john and the terror debacle check out the show notes for this episode don't forget if you're interested in hearing more about what happened with tara this week and where things can go from here tune in to unchained podcast on youtube at 11 30 a.m eastern time on friday to hear a live stream of my interview with nick

carter eric wall and eric voorhees on ust unchained is produced by me laura shin with help from anthony yoon daniel ness mark murdock shashank and clk transcription thanks for listening