Dangers of Crypto Magic Money & Stablecoin Mirage

A Thread: Dangers of Crypto Magic Money & Stablecoin Mirage

Looking back, there's always ponzi high-stakes games involved with stablecoins.

Let's dive deep into why this could be setting us up for a financial domino effect. 🧵👇

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You start with 1 ETH, valued at $3,000.

Through a series of swaps and stakes, you transform this into a much larger sum, on paper.

Here we're turning 3k into 30k with digital wizardry. ✨

This process involves leveraging and re-leveraging the same collateral in a dizzying spiral.

The case we saw with (9,9) -> Supercharging $OHM APYs with borrowing and looping.

With this method, DeFi's allure makes the market cap balloon overnight.

So FDV here becomes a meme.

It's exhilarating in a bull market, but a house of cards in a downturn, capable of crashing down as quickly as it rose.

What we're witnessing is not dissimilar to fractional reserve banking on steroids.

Your initial deposit multiplies, but instead of a controlled environment, we're in the Wild West, with far less oversight and far greater risks. 🏜️💸

Critics might call it a "business cycle," but it's more akin to a bubble fuelled by "ponzinomics" and an insatiable greed for more.

It's financial fantasy, destined to burst. 🎈

Liquid staked tokens (LSTs) and liquid re-staking tokens (LRTs) are being hailed as innovations.

Yet, they could very well be the next bubble waiting to burst, threatening to take down speculators and the entire ecosystem. ⚠️

Projects like EigenLayer might seem exciting, but they're amplifying risks.

The creation of new LRT-backed stablecoins could be the tipping point, pushing the bubble to its breaking point. 🆘

Remember, if the underlying ETH falls in value, the entire house of cards comes tumbling down, initiating a liquidation cascade that could wipe out fortunes overnight.

This isn't just theory.

Remember $LUNA, $UST

What's at stake isn't just individual investments but the integrity of the ETH ecosystem itself.

A massive LRT bubble could drag ETH, and even BTC, down with it as everyone rushes for the exits in a panic sell-off. 📉

Bear markets brutally correct these imbalances.

They serve as a harsh reminder of the dangers of greed and the importance of sustainable growth. 🐻

Remember Terra Luna UST? It's a tale of what happens when greed outpaces reality. We must learn from the past or be doomed to repeat it. 📚💡

This cycle, the bubble is forming around ETH LRTs and associated stablecoins.

It's a red flag for those paying attention.

But at the same time I am excited for the LRT opportunity.

A small part of me still has a slight belief in the LRT staking future.