Whether you're trying to navigate the world of Crypto Twitter or preparing for Web 3.0, understanding the lingo is imperative to understanding the information available. You might be very familiar with the English language, but don't let that fool you, crypto slang on social media is a language of its own.

While you might be familiar with concepts such as mining and smart contracts, here we upgrade you to the next level of crypto jargon content. Below we run you through the 20 biggest acronyms and terms you need to learn when embarking on your Crypto Twitter journey. Good luck!

20 Top crypto terms and acronyms

Apeing In 

Apeing in refers to buying a token or more commonly an NFT right after launch without doing the necessary research. Also sometimes expressed as "I aped", this is usually a result of being fearful you're going to miss out on potential gains. Always DYOR. 

Bag Holder 

This term refers to an investor that is holding a cryptocurrency or NFT that they cannot sell for a higher price, and cannot sell at the current price (as it is too low). While this isn't entirely negative, it's not very positive either. Bag holders will simply need to wait out the market dip.

BUIDL

First made famous by Ethereum founder, Vitalik Buterin in 2018, buidl is an obvious typo of the word build and refers to "build useful stuff". The concept revolves around developers utilising blockchain technology, to hopefully, provide a solution to the industry as a whole. 

BTFD 

Standing for Buy The F** Dip, BTFD has been described as a "prominent investment lesson". Buying the dip is when investors accumulate cryptocurrency during a bear market when the prices are trading at less than their value. Quoting Warren Buffet, "be fearful when others are greedy, and greedy when others are fearful."

DAO

DAO stands for decentralised autonomous organisation and acts as a form of venture capital funding, replacing a board of directors with open-source coding. Operating entirely automatically, everyone is granted ownership and is involved in the decision-making. DAO essentially describes the structure of Web 3.0 companies. 

Dapps

You may be familiar with this term already, decentralised applications are any digital apps built on top of a blockchain network. Instead of operating off of a centralised computer system, dapps harness the power of blockchain and are maintained and operated by the network on which they're built. 

Ethereum, Solana and Cardano are popular platforms on which developers can build their dapps, with no limit to what industry these dapps can be built for, from payments to entertainment to supply chain management.

Diamond Hands

This term refers to an investor who will never sell. Diamond hands push through the losses, gains and volatility, resisting the dips and the peaks. These are hardcore hodlers who strongly believe in a project's vision. 

DeFi

Another term you're likely to have come across is decentralised finance, DeFi. DeFi is a sector of the crypto industry that provides traditional financial products and services only using blockchain technology, like lending, borrowing and providing liquidity. The aim of DeFi products is to remove the centralised nature of banking and make things more accessible and inclusive of the masses. PancakeSwap, Aave and The Graph are examples of DeFi platforms. 

Degen

Degen is short for degenerate risk-taker, someone who makes highly risky bets without due diligence. While this is typically frowned upon in the real world, in the crypto world this is a badge of honour. Being a degen and making money fast is the ultimate flex. We still recommend that you DYOR beyond just the project's website and not persue this status.

DYOR

Possibly the most important phrase when it comes to investing in cryptocurrencies and NFTs: always do your own research. Never follow anyone's advise blindly, no matter how much money they've made, instead, always look into a project before investing in it. DYOR takes a firm stand in reminding you that you are accountable and responsible for your investment choices. 

GMI

A term of endearment in the crypto space, GMI stands for Gonna Make It, used to reassure someone that they're on the right track. Often thrown around on Twitter and Discord, GMI offers someone an affirmation in their decisions. 

On that note, NGMI stands for Not Gonna Make It. Usually used when someone makes a mistake or does something crazy, or when someone makes ignorant comments about the crypto space when they know little about it. It can be brutal out there, but DYOR and you'll be ok.  

Genesis Collection

Similar to how the first block on a blockchain is referred to as the genesis block, a genesis collection is the first NFT collection created by an artist. Buying items from a genesis collection is a symbol of early support and usually comes with some added benefits, like access to early releases, insider info or concert tickets.

HODL

While we're familiar with what HODL refers to (holding onto a cryptocurrency for a long time), many might not be aware that it has been gifted an acronym of its own. We say "gifted" because the term originated from a typo in a Bitcoin forum. HODL has affectionately been expanded to Hold On for Dear Life.

Metaverse

The metaverse, while not an acronym, refers to an alternative reality that exists in the digital realm. This digital space allows users to work, play, socialise and do business, interacting with others as they do. The metaverse can be described as a combination of VR (virtual reality), AR (augmented reality) and 3D worlds.  

NFT 

This is a big one. It stands for Non-Fungible Tokens and refers to anything that someone can create, store and sell on the blockchain but is not fungible. Each NFT is unique and cannot be used interchangeably like most other cryptocurrencies. Also note that an NFT is a token standard and can be built on various blockchains, while ETH, for instance, is the native token to Ethereum and cannot be used by other blockchains. 

Shill

Shill refers to someone promoting a particular cryptocurrency to create excitement for it, usually to their own financial benefit. The purpose of shilling a coin is to generate hype that will hopefully lead to mass buying. Most platforms frown against shilling as it's essentially part of the same family tree as pump and dumps. 

Paper Hands 

The opposite of diamond hands, paper hands are quick to sell, often too early, giving in to pressure and volatility. 

P2E

P2E stands for play to earn and is a concept in gaming where players can earn an in-game asset that holds value outside of that ecosystem. Axie Infinity, for example, is a game in which users can earn AXS, which is traded on many big exchanges. Gods Unchained and Evaverse are other P2E games.

RUG

Sometimes referred to as a "rug pull", rug is used to describe a situation where the founders of a project run away with the raised funds. These scams are not uncommon in the unregulated world of cryptocurrencies, however, they have become much fewer and far between since the earlier days. Their actions often send the crypto price plummeting to zero and cause huge losses for parties involved. 

When it comes to navigating the cryptocurrency markets, staying informed and staying away from FUD can oftentimes be more complicated than one might imagine. In this article, we're going to guide you through how to recognize FUD in the blockchain space and how to avoid it. 

Since Bitcoin entered the scene in 2009, the crypto markets have seen their fair share of ups and downs. Although it's true that each market downturn has been followed by a recovery and considerable development, experienced and novice traders alike may find that times of decline are difficult to navigate. Particularly with the rise in FUD.

Before we cover the tools of the trade to recognize and avoid FUD, let's first cover what FUD is, exactly.

What is FUD?

FUD in the cryptocurrency realm stands for Fear, Uncertainty and Doubt. This term is used to refer to inaccurate information released by people who wish to manipulate the markets. Releasing FUD content is intended to influence a trader to make decisions that might affect the cryptocurrency's price or their holdings in some way (usually encouraging them to sell).

While commonly used against Bitcoin, Ethereum and other cryptocurrencies are also targeted. FUD typically leads to investors selling off their coins, leading to a panic sell which snowballs and results in a significant loss in value for the coin. 

Often mentioned alongside FUD is the term FOMO, Fear Of Missing Out. FOMO is centered around the fear of people missing out on profits, leading them to make quick decisions that aren't necessarily the best ones. While FUD tends to instigate selling an asset, FOMO tends to drive traders to buy an asset. Essentially, these two terms are designed to tap into human emotions that lead to quick decisions. 

FUD is typically released through a rumour published on a well-respected website, a negative news item, or a well-known figure expressing concerns about a certain asset (commonly done over Twitter). Content surrounding FUD and FOMO tend to be from organisations or individuals that have something to gain from the intended action. The content is designed to strongly influence the reader. 

FUD and FOMO aren't strictly related to the crypto market, such tactics have also been witnessed in the stock market and other commodity trading spaces. The jargon has become synonymous with trading. 

How to recognise FUD

The crypto community might seem tight-knit but there are often ill-actors that gain access to the trusted space and infiltrate it with bad news. This is often seen when people use a commonly discussed topic, such as regulation, to build a narrative that isn't necessarily true to influence traders. 
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Here are several tips to ensure that you don’t fall victim to FUD:

Establish a trading goal 

Before you enter the crypto market ensure that you have definitive goals, with accompanying timelines. When faced with FUD or FOMO information, consider if the resulting actions of this news will move you closer to your goal or further away. If you stay focused on your goal you are less likely to be swayed by market sentiment. 

Build a trading strategy before entering a trade

A trading strategy generally involves determining a stop loss, entry point, target sell point, and amount of capital. By establishing this before entering the trade, you will have clear objectives to follow and be less likely to fall victim to FUD-centered misinformation. 

Stay informed, but verify sources

Keeping an eye on the crypto markets and staying informed is imperative for any trader, especially day traders. Ensure that the places that you acquire your information from are reputable and legitimate, and if something sounds suspicious, verify it through a number of other sources. 

Be patient and consistent

Engaging in crypto trading involves making well-informed decisions based on market trends and supporting technology. Rather than seeking rapid financial gains, it's important to maintain patience and consistency in working toward your goals, while staying focused on your intended path.

Navigating FUD

Despite this sounding difficult, FUD is easily avoidable if you stick to these tips above and only seek information from reliable news sources. While Twitter may have quick tips, it's also hard to determine what the author's intentions are.

Consider whether something sounds accurate or not, and always conduct your own research when considering involvement in a new project. Be sure to act responsibly and observe market trends with a critical perspective.

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Formerly called the Matic Network, Polygon was created as a scaling solution to improve on some of the problems (including transaction price) within the blockchain network. Currently sitting within the top 20 biggest cryptocurrencies based on market cap, Polygon has caught the attention of many crypto investors. In this article, let's explore what Polygon is and discover the services and use cases associated with MATIC.

By providing a framework for generating scaling solutions that are compatible with Ethereum, Polygon aims to guide that future closer to reality. The team has announced the launch of a Proof of Stake sidechain, which has already attracted some interest among the Bitcoin, decentralised apps and cryptocurrency community.

The much-anticipated Ethereum scalability roadmap is now coming into force, and the Polygon initiative is one of them helping to achieve this. Let's take a closer look at the platform.

What is Polygon (MATIC)?

The Polygon network enables the development of Ethereum-compatible blockchain networks and scaling protocols. Polygon is more of a protocol than a single solution. This is why one of the ecosystem's primary products is the Polygon SDK, which allows developers to create these Ethereum-compliant networks. Designed as a modular, flexible second layer, the network aims to expand Ethereum in terms of size, efficiency, usefulness and security and in turn transform it into a full-fledged multi-chain system. 

Polygon uses a Proof-of-Stake consensus mechanism combined with the Plasma Framework. The Plasma Framework facilitates the execution of scalable and autonomous smart contracts, as proposed by Ethereum founder, Vitalik Buterin. 

Through the platform's intricate technology and architecture, Polygon can process up to 65,000 transactions per second and execute block confirmation in less than two seconds. While Polygon is currently only interoperable with the Ethereum network, in the future it aims to support several other top blockchain platforms. 

Who founded Polygon/Matic?

The network was created by blockchain developers Jaynti Kanani, Sandeep Nailwal, and Mihailo Bjelic all with extensive experience building with Ethereum. The other co-founder, Anurag Arjun, is the only founding member to come from a non-programming background and serves as a business consultant and product manager.

After a successful ICO in 2017 and 2019, the team raised over $5.6 million. The Matic Network was later launched in 2017, before undergoing a rebranding in 2021 to the Polygon network as it is known today.  

How does Polygon work?

Polygon is a multi-chain platform that makes use of a network of side chains to facilitate transactions in an effective and cost-efficient manner. Bound to the Ethereum blockchain, Polygon can handle many different protocols, including the recently popular DeFi movement.

Polygon has similar functionality to other blockchain platforms like Polkadot, Cosmos, and Avalanche.

Through the platform, users are able to build Ethereum-compatible decentralised applications (dapps) using sidechain architecture and connect them to the main blockchain.

Through the PoS mechanism, users are able to stake MATIC in order to validate transactions as well as vote on network upgrades. The platform also uses a process known as PoS 'checkpointing' which revolves around a select team of block producers being appointed to each checkpoint by the stakers on the network.

These producers enable the platform to create blocks at a rapid pace as well as maintain decentralisation by delegating PoS checkpoints to the main Ethereum chain. Block validation happens when periodical proofs of blocks are published by the block producers.

The Polygon network allows you to execute almost all of the same functions as Ethereum, but with fees that are significantly lower.

What is MATIC?

Matic is the native cryptocurrency to the Polygon network and gets its name from the platform's former name. MATIC is a utility token centred around providing governance rights and securing the network, as well as being used for staking and gas fees on the platform. 

As a sidechain, it runs parallel to Ethereum. It's used for fees, staking, and more. Polygon is a "layer two" or "sidechain" scaling solution that runs alongside the Ethereum blockchain - allowing for speedy transactions and low fees. The end goal of Polygon is to achieve millions of transactions per second.

The Polygon Network uses its own cryptocurrency, MATIC, to pay fees on the network, for staking, and for governance (meaning holders of the token get to vote on changes). The acronym MATIC is derived from Polygon's earlier days. As mentioned above, Polygon was launched as Matic Network in October 2017, but developers changed their name to Polygon in early 2021.

Polygon's MATIC token is an ERC-20 standard utility token based on Ethereum. The token allows for low fees and instant transactions, just like the rest of the Polygon ecosystem. The maximum supply of MATIC is 10 billion coins, with new coins released into circulation on a monthly basis. At the time of writing roughly 70% of this total supply has entered circulation with all coins scheduled to be released into circulation by December 2022, according to the official schedule. With a maximum supply capped at 10 billion, this is making MATIC deflationary.

How has the price of Polygon (MATIC) changed over time?

Let's explore the MATIC price performance, looking at the value in US dollars. After a launchpad sale selling MATIC tokens at $0.00263 per token in April 2019, MATIC soon began trading at $0.0044 once launched on its own network.

For the next nineteen months, the price ranged between $0.01 and $0.03, before gradually entering a more bullish trading period in early 2021.

Opening the year at $0.01, the price reached $0.41 in March before soaring to its current all-time high price of $2.68 achieved in mid-May 2022. Following the price peak, the price soon dropped to $1.08 in the next five days, before correcting to $2.21.

In July 2021, the MATIC price reached a low of $0.61 before embarking on a gradual uptrend. How much is Polygon worth? Several months later and at the time of writing MATIC was trading at $1.60.

What factors can affect the price of Polygon (MATIC)?

There are several factors affecting the price of the Polygon token, MATIC. The most pressing factors are the demand for the token (people buying and selling the cryptocurrency) and the number of users looking to participate in staking.

Other factors include the general crypto economics, the market sentiment, the project's fundamental and technical developments, the news surrounding both the MATIC market and cryptocurrency market in general, and how actively the token is traded on exchanges (inflow and outflow). Regulation announcements also typically affect the price of cryptocurrencies.

How to buy MATIC

Users looking to incorporate MATIC into their cryptocurrency portfolio will need to do so by acquiring them through a crypto exchange. Always ensure that you do adequate research, on both the exchange you wish to use and the cryptocurrency, before engaging in any activity. Cryptocurrencies are high risk assets, and professional financial advise should be considered.

Portfolio diversification involves spreading your funds across various securities and assets to lower risk and boost potential returns. This strategy, recommended by financial experts, helps mitigate risk and prevents your portfolio from relying too heavily on any one asset. Below we explore the concept of diversification and its benefits. 

What is diversification?

Diversification plays a pivotal role in portfolio management, aiming to spread out allocations strategically to reduce risks associated with market fluctuations. The underlying principle is straightforward: rather than concentrating all resources in one area, diversify across multiple sectors. 

This approach minimizes the impact of underperformance or losses in any single allocation, as gains from other allocations can potentially offset them. 

A diversified portfolio may include a mix of assets such as stocks, bonds, funds, real estate, CDs, and savings accounts, each offering distinct potential gains and losses under different economic conditions. 

Additionally, in a business context, diversification extends to broadening product offerings or entering new markets to reduce dependence on a single revenue source and mitigate risks.

Exploring the concept of diversification in portfolio management

Diversification is about spreading investments across various asset classes to reduce risk exposure. For instance, a diversified portfolio might include stocks, bonds, and cash equivalents, or diversified stocks across multiple countries and industries.

This strategy helps minimize the impact of poor performance in one asset class. Additionally, diversified portfolios act as a buffer against market volatility, providing greater stability over the long term compared to relying solely on one asset type.

Different types of asset options

Below we explore a number of asset options that can be utilized in a diversified portfolio:

Stocks

• Stocks tend to have the highest long-term potential returns but can also experience significant volatility in the short term.

Funds

• Funds can be diversified if they hold many different assets, but some funds may focus on a specific industry or sector.

Bonds

• Bonds offer more stable potential returns with fixed payouts but are influenced by changes in interest rates.

CDs and savings accounts

• CDs and savings accounts provide stability and steady growth based on interest rates.

Real estate

• Real estate can provide slow appreciation over time and potential income, but it also involves maintenance costs and high commissions.

By owning a mix of these assets, you can benefit from the different performance characteristics they offer. When some assets are performing well, others may not be doing as well, and vice versa. This lack of correlation between assets is what makes diversification effective in reducing risk.

The benefits of diversification

Diversification not only serves to diminish portfolio risk but also fosters the potential for improved returns. By distributing allocations across different asset classes, you're more likely to achieve a smoother overall return profile. While one asset may undergo a downturn, another might exhibit positive performance, thereby offsetting the overall impact on your portfolio's performance.

It's important to recognize that while diversification can mitigate risk, it's incapable of completely eradicating it. While it effectively reduces asset-specific risk, such as overexposure to a single stock, it doesn't shield against market-specific risk, which is inherent in owning particular types of assets.

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How to build a diversified strategy

To develop a diversification strategy, you can start by creating a portfolio that includes a mix of different assets. Be sure to allocate based on your personal risk tolerance, time horizon, and financial objectives. Below are several options to consider when building a diversified portfolio.

Examples of building a diversified portfolio

Please note that this is not financial advice but merely examples of how one might diversify their portfolio.

You might explore the option of allocating funds to a widely diversified index fund, such as the S&P 500 index, which holds interests in numerous companies. Combining bonds and CDs could contribute to portfolio stability and assured potential returns. Holding cash in a savings account can offer stability and act as a financial safety net.

If you're inclined to expand beyond the fundamental approach, further diversifying your stock and bond allocations is an option. For stocks, you could contemplate allocating funds to a fund targeting emerging markets or international corporations, as these often diverge from broader index funds. Regarding bonds, varying maturity lengths in bond funds can grant access to short-term and long-term bonds.

Some financial professionals even suggest the consideration of including commodities like gold or silver to extend diversification beyond conventional assets.

Building a diversified portfolio may seem complex, but it doesn't have to be. You can utilize low-cost mutual funds or exchange-traded funds (ETFs) that offer diversification across different asset classes. Many major brokerages now offer these funds with zero commissions, making it a more accessible and cost-effective offering for those allocating funds.

If you prefer a more hands-off approach, you could contemplate allocating funds to a target-date fund or utilizing a robo-advisor. Target-date funds recalibrate asset allocation according to your planned time horizon, progressively adjusting to lower-risk assets. Robo-advisors use algorithms to formulate and sustain a diversified portfolio grounded in your objectives and risk tolerance.

Risk management

Be sure to regularly review and rebalance your portfolio to ensure it aligns with your objectives. Assessing and adjusting the asset allocation helps maintain desired levels of risk and potential returns.

In conclusion

Diversification stands as a vital strategy for individuals seeking to lessen risk and enhance potential returns. By dispersing allocations among various assets, you can alleviate the influence of any single asset's performance on your overall portfolio.

Although diversification can be self-implemented, seeking guidance from seasoned financial advisors is advisable. These professionals offer tailored guidance suited to your unique financial circumstances and objectives. With their expertise, they assist in constructing and managing a well-diversified portfolio aligned with your risk tolerance and investment horizon, aiding you in navigating diverse economic conditions as you pursue your financial goals.

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Cryptocurrencies function much like traditional currencies in that they can be transferred digitally and used to pay for goods and services around the globe. However, they also pose several benefits that fiat currencies lack, such as the fact that they operate using decentralised networks and not a bank or government agency (providing greater control to users) and can execute international payments in a fraction of the time and cost.

There are many that believe cryptocurrencies will eventually replace traditional currencies, however, there is plenty to be done before we get there. We are sooner more likely to experience cryptocurrencies working alongside traditional currencies than entirely replacing them, a movement that is generating momentum each day. 

Before we launch into what the industry needs in order to go mainstream, let's first observe how we reached this pinnacle moment in the history of finance. 

How crypto officially got on the map

Bitcoin was created to provide an independent financial system to people that were thrown into serious debt following the global financial crisis. The digital currency was created to provide individuals with the opportunity to control their funds independently from any financial institution.

Since the advent of Bitcoin in 2009, cryptocurrencies have experienced interest from many groups of people, largely outside of mainstream media. In 2017, following a wild bull run, Bitcoin was first thrust into the mainstream media spotlight as it fast became the main topic of conversation across various news channels around the world. 

Fast forward three years to the pandemic. Following global market crashes, Bitcoin displayed impressive resistance and built its wealth back more quickly than many other assets and stock markets. This caught the eye of many large corporations, dispelling scepticism and leading one in particular to move their USD reserves into Bitcoin. Following Microstrategy's decision to buy large amounts of BTC, many other large corporations followed suit, with companies like PayPal and Square even incorporating cryptocurrencies into their systems. 

This wave of institutional investment not only increased the value of the markets but also helped to build confidence for retail investors to invest in such "risky" assets. This also played a large role in major corporations embarking on serious research and development of both blockchain technology and cryptocurrencies. 

What crypto needs

Commonly used as an investment tool, cryptocurrencies were designed to facilitate faster and more economical transactions. Operating on a peer-to-peer basis, cryptocurrencies essentially cut out the middleman (and its fees) and make digital cash more readily available. 

As with most things in life, there are two significant camps for and against the mainstream use of cryptocurrencies. Those for the widespread adoption believe the spike in interest will continue on its upward trajectory, believing that very little could hinder its growth. Those against the growth argue that fluctuating market prices and uncertainty around the practical application will hinder its mainstream adoption. 

What cryptocurrencies likely need before any mainstream adoption is a well planned regulatory framework that can appease both the innovative technology and the merchants and consumers using it. Regulations are a necessary component to anything becoming mainstream, and the ones surrounding cryptocurrencies are vague at best. While many nations are working on creating and implementing these, there is still a gaping hole in the industry. 

Based on conversations taking place in the banking and fintech worlds, it is highly likely that in the coming years more traditional companies will expand to offer crypto-enabled financial services. As interest and access continue to grow, companies will need to follow suit if they wish to stay in the game. Large payment processing companies like Visa and Mastercard are already looking to provide crypto services, a key indicator as to where the market is headed.

What are the disadvantages of Bitcoin compared with existing currencies?

While there are plenty of advantages, currently, the predominant disadvantages of cryptocurrencies are that they are not freely accepted around the world, and lack the necessary regulatory framework. While the adoption levels are rising there is still a gap in how and where users can spend their cryptocurrencies. Another disadvantage is the market's volatility, posing potential inconsistencies between the price when making a payment and once the payment is received.

El Salvador takes the plunge

In late 2021, El Salvador became the first country to initiate Bitcoin as a legal tender alongside the US dollar. The decision has accumulated many mixed reviews, with some hailing the president a revolutionary and others concerned he will crash the country's already fragile economy. Should his plan work out, we're likely to see this happen again. 

In conclusion

With all things considered, cryptocurrencies and blockchain technology are here to stay. While cryptocurrencies might be a significant distance from becoming mainstream, they are far too integrated into our society and financial landscape to all but disappear. All things considered, the technology is too innovative and the thought of financial inclusion too promising for any of it to go away. 

There is seldom a dull moment in the cryptosphere. In a matter of weeks, crypto winters can turn into bull runs, high-profile celebrities can send the price of a cryptocurrency to an all-time high and big networks can go from hero to bankruptcy. While we await the next bull run, let’s dissect some of the bigger moments of this year so far. 

In a matter of weeks, we saw two major cryptocurrencies drop significantly in value and later declare themselves bankrupt. Not only did these companies lose millions, but millions of investors lost immense amounts of money. 

As some media sources use these stories as an opportunity to spread FUD (fear, uncertainty and doubt) about the crypto industry, in this article we’ll look at what affected these particular networks. This is not the “norm” when it comes to investing in digital assets, these are cases of not doing enough thorough research. 

The Downfall of Terra

Terra is a blockchain platform that offered several cryptocurrencies (mostly stablecoins), most notably the stablecoin TerraUST (UST) and Terra (LUNA). LUNA tokens played an integral role in maintaining the price of the algorithmic stablecoins, incentivizing trading between LUNA and stablecoins should they need to increase or decrease a stablecoin's supply. 

In December 2021, following a token burn, LUNA entered the top 10 biggest cryptocurrencies by market cap trading at $75. LUNA’s success was tied to that of UST. In April, UST overtook Binance USD to become the third-largest stablecoin in the cryptocurrency market. The Anchor protocol of the Terra ecosystem, which offers returns as high as 20% APY, aided UST's rise.

In May of 2022, UST unpegged from its $1 position, sending LUNA into a tailspin losing 99.9% of its value in a matter of days. The coin’s market cap dipped from $41b to $6.6m. The demise of the platform led to $60 billion of investors’ money going down the drain. So, what went wrong?

After a large sell-off of UST in early May, the stablecoin began to depeg. This caused a further mass sell-off of the algorithmic cryptocurrency causing mass amounts of LUNA to be minted to maintain its price equilibrium. This sent LUNA's circulating supply sky-rocketing, in turn crashing the price of the once top ten coin. The circulating supply of LUNA went from around 345 million to 3.47 billion in a matter of days. 

As investors scrambled to try to liquidate their assets, the damage was already done. The Luna Foundation Guard (LFG) had been acquiring large quantities of Bitcoin as a safeguard against the UST stablecoin unpegging, however, this did not prove to help as the network's tokens had already entered what's known as a "death spiral".

The LFG and Do Kwon reportedly bought $3 billion worth of Bitcoin and stored it in reserves should they need to use them for an unpegging. When the time came they claimed to have sold around 80,000 BTC, causing havoc on the rest of the market. Following these actions, the Bitcoin price dipped below $30,000, and continued to do so.

After losing nearly 100% of its value, the Terra blockchain halted services and went into overdrive to try and rectify the situation. As large exchanges started delisting both coins one by one, Terra’s founder Do Kwon released a recovery plan. While this had an effect on the coin’s price, rising to $4.46, it soon ran its course sending LUNA’s price below $1 again. 

In a final attempt to rectify the situation, Do Kwon, alongside co-founder Daniel Shin, hard forked the Terra blockchain to create a new version, renaming the original blockchain Terra Classic. The platform then released a new coin, Luna 2.0, while the original LUNA coin was renamed LUNC. 

Reviewing the situation in hindsight, a Web3 investor and venture partner at Farmer Fund, Stuti Pandey said, “What the Luna ecosystem did was they had a very aggressive and optimistic monetary policy that pretty much worked when markets were going very well, but they had a very weak monetary policy for when we encounter bear markets.” 

Then Celsius Froze Over

In mid-June 2022, Celsius, a blockchain-based platform that specializes in crypto loans and borrowing, halted all withdrawals citing “extreme market conditions”. Following a month of turmoil, Celsius officially announced that it had filed for Chapter 11 bankruptcy in July. 

Just a year earlier, in June 2021, the platform’s native token CEL had reached its all-time high of $8.02 with a market cap of $1.9 billion. Following the platform’s upheaval, at the time of writing CEL was trading at $1.18 with a market cap of $281 million. 

According to court filings, when the platform filed for bankruptcy it was $1.2 billion in the red with $5.5 billion in liabilities, of which $4.7 billion was customer holdings. A far cry from its reign as one of the most successful DeFi (decentralised finance) platforms. What led to this demise?

In 2021, the platform faced its first minor bump in the road when the US states of Texas, Alabama, and New Jersey took legal action against the company for allegedly selling unregistered securities to users. 

Then, in April 2022, following pressure from regulators, Celsius stopped providing interest-bearing accounts to non-accredited investors. While against the nature of DeFi, the company was left with little choice.  

Things then hit the fan in May of 2022. The collapse of LUNA and UST caused significant damage to investor confidence across the entire cryptocurrency market. This is believed to have accelerated the start of a "crypto winter" and led to an industry-wide sell-off that produced a bank-run-style series of withdrawals by Celsius users. In bankruptcy documents, Celsius attributes its liquidity problems to the "domino effect" of LUNA's failure.

According to the company, Celsius had 1.7 million users and $11.7 billion worth of assets under management (AUM) and had made over $8 billion in loans alongside its very high APY (annual percentage yields) of 17%. 

These loans, however, came to a grinding halt when the platform froze all its clients' assets and announced a company-wide freeze on withdrawals in early June. 

Celsius released a statement stating: “Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, swap, and transfers between accounts. We are taking this necessary action for the benefit of our entire community to stabilize liquidity and operations while we take steps to preserve and protect assets.”

Two weeks later the platform hired restructuring expert Alvarez & Marsal to assist with alleviating the damage caused by June’s uncertainty and the mounting liquidity issues. 

As of mid-July, after paying off several loans, Celsius filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York.

Closing Thoughts

The biggest takeaway from these examples above it to always do your own research when it comes to investing in cryptocurrency or cryptocurrency platforms. Never chase “get-rich-quick” schemes, instead do your due diligence and read the fine print. If a platform is offering 20% APY, be sure to get to the bottom of how they intend to provide this. If there’s no transparency, there should be no investment. 

The cryptocurrency market has been faced with copious amounts of stressors in recent months, from the demise of these networks mentioned above (alongside others like Voyager and Three Anchor Capital) to a market-wide liquidity crunch, to the recent inflation rate increases around the globe. Not to mention the fearful anticipation of regulatory changes. 

If there’s one thing we know about cryptocurrencies it’s that the market as a whole is incredibly resilient. In recent weeks, prices of top cryptocurrencies like Bitcoin and Ethereum have slowly started to increase, causing speculation that we might finally be making our way out of the crypto winter. While this won’t be an overnight endeavour, the sentiment in the market remains hopeful. 

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