What do you think is the cause of the Depeg crisis in LUNC?
You might think of it as a short-selling attack by the supposed FTX forces, a lack of reserves, or a self-made play by the TFL.
There may be many reasons, but the situation has already occurred. The cause will be determined by the investigative agency, and we need to focus on overcoming this situation.
LUNA/UST was an innovative idea in crypto, but this algorithmic design is similar to a fixed exchange rate system in the monetary economy. In fact, the Hong Kong dollar is still introducing a peg system that fixes the value of the US dollar over 20 years.
So if we look at the past history of this currency, we might find an idea to restore the LUNC.
Did you know that the U.S. dollar had experienced a de-peg crisis?
In 1944, the United States had the most gold reserves in the world and they announced that they would fix the value of 1oz gold at $35 USD. History records the Bratton Woods system.
The U.S. wanted the dollar to become a global reserve currency used by people around the world, They supported USD to Europe, which is the Marshall Plan.
But it would have to record a current-account deficit to supply dollars that are pegged to the value of gold to countries around the world. The U.S. economy gets poorer and the dollar value gets lower.
On the contrary, if the United States creates a trade surplus, it will not be able to act as a key currency because global currency liquidity will decrease.
And the other big question was, if every country was going to exchange U.S. dollars for gold, how could they handle the bank run? The amount of gold is limited.
That concern comes true decades later. In the aftermath of the Vietnam War, the U.S. economy fell into recession, and other countries wanted to turn the dollar into gold in preparation for U.S. bankruptcy. But the U.S. gold reserves were only about 30 percent of the total amount of money issued.
Eventually, 1oz/$35 in the United States was de-peg. The gold market price soared to 1oz/$44.
In 1971, The U.S. eliminates the system of exchanging dollars for gold, and history records this as the Nixon Shock. In the aftermath of the de-peg, the value of the U.S. dollar was plunge more than 30% in a year.
And many countries including the United States convert from a fixed exchange rate system to a floating exchange rate system.
Even the United States, the world’s strongest country suffered a De-peg crisis. So how did they overcome this situation?
They lacked gold reserves, but they had the most powerful defense in the world.
They signed contracts with Middle Eastern countries, allowing them to trade oil only in US dollars. And the Middle Eastern countries are protected by the great defense of the United States.
The contract has been going on and we call it the Petro-dollar.
In conclusion, the U.S. solved the USD/GOLD de-peg situation by taking control of energy hegemony. Recovery would not have been possible without their great force.
So what do we see here is what’s causing the problem?
The reason why the U.S. fixed exchange rate system collapsed was because of the economic recession and the lack of gold reserves.
If you put this into the current cryptocurrency market, the reason of UST/LUNA de-peg is due to the liquidity crisis in the market and TFG’s reserves which were far short of UST issuance.
This applies to any currency that has a fixed exchange rate. If you don’t have enough reserves, depeg will happen someday.
But there’s an exception here.
There are many other currencies besides the Hong Kong dollar.
Several countries including the Bahamas, Saudi Arabia, the United Arab Emirates, Oman, Jordan, Qatar, Kuwait, and Cuba, are pegging the value of their currency with the U.S. dollar.
What they have in common is that they have a politically friendly relationship with the United States. USA guarantee Their currency That’s why their currency value is maintained.
The Hong Kong dollar is feared to be de-pegged by recent political friction between China and the United States. But the reason why they’re still keeping their value in those concerns is because they have enough foreign reserves.
In this way, we have to meet one of three conditions in order to re-peg the USTC.
-
Sufficient foreign exchange reserves
-
Maintaining friendly relations with key currency issuers
-
The World’s Most Powerful Force
Unfortunately, the LUNC community does not cover all of these.
So we have to change from a fixed exchange rate to a floating exchange rate.
You don’t set the goal of re-pegging straight to USTC $1
You set the goal of recovering slowly by the target value of $1.
There are cases of countries that have recovered their economies even after the financial crisis.
That’s the Republic of Korea.
In 1997, Korea experienced a foreign exchange crisis due to the economic recession. They lack the US Dollar to revive themselves, and they apply for IMF bailouts.
In the process, they held an event where the whole nation participated and donated gold for free. They donated gold to save the country including their wedding rings and family treasures. the amount of gold collected in that way was 225 tons.
Companies reorganize their industries through restructuring and earn foreign currency by entering overseas markets, not domestic markets.
And the Republic of Korea was emerge from the financial crisis just 3 years after the IMF bailout. The value of money was recovered as well.
While watching the LUNC BURN campaign, the gold donation movement in Korea in 1997 became an homage.
The campaign did not make a decisive contribution to economic recovery, but it was a major event that showed community unity and commitment. It was widely reported around the world and recorded as the country’s history.
What’s next? There is no organization like the IMF in the Crypto world.
Some people call out BINANCE or a huge VC to bail out this chain.
But miracles don’t come to people who do nothing.
They don’t give weapons to soldiers who don’t have the will to fight.
No stupid businessman spends astronomical amounts of money on chains that are unlikely to resurrect.
We’ll have to find a solution for ourselves. And you will have to prove yourself the possibility of the community.
Already in the history of money, the deflation of money and the foreign exchange crisis have been repeated many times.
Throughout that history, we will be able to find a solution.