A Chinese state-backed publication, Economic Daily, published an op-ed article suggesting that the recent Terra blockchain’s LUNA crash and de-pegging the UST stablecoin justifies the Asian country’s decision not to allow crypto-related activities. The author identifies the U.S. Federal Reserve’s interest rate increases and the purchase and sale of crypto assets by various investment giants as the main causes of the market crash.
The Impact of the Recent US Interest Rate Increase
China’s state-backed publication Economic Daily has published an author arguing that the recent crash in Terra’s LUNA as well as the de-pegging and removal of the UST stablecoin validates his country’s decision not to allow or prohibit virtual currency-related activities. Li Hualin, the author, claimed that China’s “decisive and timely” actions helped “extinguish virtual currency speculation’s ‘virtual flame’ and placed ‘protection keys’ on investors’ pockets.
reported on Bitcoin.com News. Terra blockchain’s native token LUNA was in trouble after its other project, the algorithmic stabilitycoin UST, lost it’s peg to the U.S. Dollar. The native token plunged from a value of more than $87 on May 4, 2022 to just below $0.0003.
Some crypto experts blame Do Kwon’s actions for the token’s collapse in the opinion article. However, the Chinese author seems to have attributed the token’s decline primarily to the U.S. Federal Reserve raising interest rates. The author explained how the token fell due to the rise in interest rates.
The Federal Reserve launched an interest rate increase cycle at the start of the year. Global liquidity has increased. The Federal Reserve increased interest rates 50 basis points each at one time in May. This had a negative effect on capital and market sentiment. Virtual currencies were first to feel the brunt of the impact.
Virtual Currency and Chinese Law
Some in the crypto community are still trying to figure why the dramatic collapse of Terra tokens. Several others have accused Citadel and Blackrock of being responsible for LUNA’s troubles. The firms have denied these allegations.
In the meantime, the Chinese author claims that crypto market investment giants can cause violent currency fluctuations, leading to large-scale sell-offs.
Hualin reiterated that Chinese law does not protect virtual currency transactions. These comments seem to contradict the recent Shanghai High People’s Court judgement declaring bitcoin to be protected by Chinese law.
The article ends with the author urging investors not to succumb to greed and to stop bottom-hunting. ‘”