With the stable cryptocurrency UST and its sister currency Luna dropping over 99.7% in less than a week, many crypto investors are skeptical whether or not their investments are safe. As of now, there is no true reasoning for the crash, however many conspiracy theorists speculate that big time companies like BlackRock and Citadel were behind the crash.
To keep it short, certain believers of the theory claim that BlackRock borrowed around 100,000 BTC from Gemini, and sold some in order to buy UST(Terra – stablecoin). They then supposedly attempted to dump this large amount of UST on the markets, which obviously caused liquidity issues, while also using these funds to short Luna. Now obviously a company like BlackRock which manages over $10 trillion in funds would not want to get their hands dirty for no reason. This speculation comes after BlacRock provided UST’s main competition, stable coin USDC with an estimated $300 million in funding.The argument of morals in this case are not in BlackRock’s favor, as they have been known for investing heavily in companies that have a major negative environmental impact. However a relevant question that could most likely dismiss this theory is Why would a company that moves $10 trillion a year, get their hands this dirty to protect an investment worth $300 million.
Now regarding the likelihood of this happening to another stablecoin, one must take a look at the marketcaps of certain coins. Considering that even at its peak, stablecoin UST only had a market cap of around $25 billion, this would make it a lot easier for a massive panic to affect the market to this extent. Compare this to the peak market cap of Bitcoin at around $845 billion, and it really puts things into perspective. If a mass panic caused investors of UST to dump a total of $10 billion in a week, nearly half of its market cap would be wiped. However if a mass panic caused Bitcoin investors to dump a total of $10 billion in a week, the coins price would not see nearly the amount of drastic change. Furthermore, not only is the market cap of many stable coins a security factor for investors, but also future regulations could come in handy. These possible future regulations would prevent any “shady” transactions that have the potential to completely wipe a coin out like what was done to UST and Luna.
If BlackRock and Citadel were indeed behind this massive selloff, then no punishment would be handed to those in charge regardless of the billions lost that belonged to the common people. Even though many crypto enthusiasts(myself included) are not in favor of an over controlling regulation of crypto currency, if this regulation means saving the common people by big time corporations then I am all for it.
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