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It's easy to forget that before Terra/Luna and Celsius imploded, they were the hottest thing in crypto.
Venture capitalists and others who invested early collected obscene yields while the value of their tokens soared.
Bitcoin's returns looked small and frail by comparison. So vast amounts of capital flowed into Luna and Celsius, along with countless imitators.
When these projects had their reckoning, though, $70+ billion in market value was rapidly vaporized, setting off a daisy chain of secondary implosions at other lenders and waves of selling across markets.
The fallout from these schemes unwinding has hurt the price of Bitcoin short-term. But many of us believe that it will ultimately strengthen the position of Bitcoin immensely.
Bitcoin doesn't offer unsustainable 20%+ yields. It didn't have a seed round where VCs bought in for pennies.
The beautiful thing about Bitcoin is that it doesn't try to do too much. It's just the most liquid, decentralized, secure, and proven digital asset.
And perhaps most importantly of all, the SEC has clearly stated that Bitcoin is a commodity (not a security). With more crypto regulation almost certain, this could be a tremendous advantage by itself.
Bitcoiners vs. Crypto Degens
In an interesting twist, it turns out some of the few who predicted the downfall of Luna and Celsius were "Bitcoin only" types.
The New York Times recently profiled one of these "hardcore Bitcoiners", Cory Klippsten of Swan Bitcoin. In late March Mr. Klippsten warned that Luna was a scam. Weeks later the project collapsed.
There has always been tension between diehard Bitcoiners and dodgy "crypto" projects like Luna. So this shouldn't be too surprising.
Here's an excerpt.
In the crypto world, Mr. Klippsten is known as a Bitcoin maximalist, or "maxi" — a hard-core evangelist who believes Bitcoin will transform the financial system even as fraud pervades the rest of the crypto ecosystem. The maxis are just a subset of the crypto industry, but their ranks include influential figures like Jack Dorsey, a founder of Twitter and an early Bitcoin proponent.
"The only future for non-Bitcoin crypto is to seek to be co-opted by banks and governments and become part of the existing system," Mr. Klippsten, 44, said from his home in Los Angeles, where a decorative Bitcoin sculpture sat on a bookshelf behind him. "Bitcoin actually is outside of the system."
The article does a good job summing up the case for "Bitcoin, not crypto" in the wake of Luna/Celsius.
The debate being fueled by the maxis has become a battle for crypto's future. The crash demonstrates how closely the industry resembles the worst of the traditional finance system — an interconnected web of risky ventures and casino-like trading practices.
It's a good point. But it's also important to realize that this "battle for crypto's future" is nothing new. The first scammy cryptos came out in 2012. They tend to outperform Bitcoin for a brief period of time, then fail.
Luna and Celsius are just the latest to challenge the king and fail. Eventually one hopes that investors will learn their lesson. But such is human nature.
