Pether (8)
Gangnam, Yuseong Town D-Dong.
Just last year, this building had belonged to Yuseong Mulsan, but ownership had changed hands to Continue Capital.
Continue Capital Korea had already moved in, and the fashion agencies and entertainment companies it had invested in began filling the building one after another. Not long ago, SW Games had finished moving in as well.
Lee Dong-ho and Edward, acting as investors, toured the entertainment agencies and met with the girl groups there.
“Girl groups really are the best, aren’t they?”
At Lee Dong-ho’s words, Edward nodded.
“Korean girl groups is best.”
The two exchanged a look and bumped fists lightly, and Kim Beom-seok let out a sigh as he watched them.
While the Korean branch was busily making investments, shocking news came in from the United States.
Rumor had it that Continue Capital was about to short a staggering 50 billion dollars’ worth of Pether.
That alone was enough to send the cryptocurrency market into turmoil.
Lee Dong-ho received a call from Han Miru.
“I am, but what’s with this all of a sudden? Shorting Pether?”
“The crypto crowd is cursing us out right now. At this rate, they might start protesting any day now.”
“Yeah. It’s safer here, at least.”
Korea was a world powerhouse when it came to cryptocurrency investment. After Continue Capital announced its attack on Pether and prices began to fall, Korean crypto investors showed intense outrage.
“Uh, sure.”
When headquarters gave an order, the branch had to follow.
The employees put the materials together, and Lee Dong-ho sat down with Kim Beom-seok and Edward Benson to analyze the report.
Edward looked surprised. “Korea has a pretty significant share of the crypto market.”
Lee Dong-ho replied with pride. “When it comes to crypto, you’ve got to talk about Korea. Remember the Kim Chang-gi panic? That happened here too.”
Who could have predicted that one line from the Korean Minister of Justice would send the cryptocurrency market crashing?
“Hmm, but this part is a little strange.”
“What is?”
Edward held out the page he was reading.
“The KOSPI market cap is about 2,400 trillion won, but the won market for cryptocurrencies is only 200 trillion.”
“That makes sense. KOSPI is a market where not just retail investors, but foreigners, institutions, and pension funds all invest. The crypto won market is almost entirely retail.”
“And yet the average daily trading value in crypto is 18 trillion won, which is more than 20 percent higher than KOSPI’s 15 trillion.”
How was that possible?
Lee Dong-ho said it like it was the most obvious thing in the world. “Because people buy and sell dozens of times in a single hour. In other words, the turnover is insane.”
“If they trade that much, the fees must be brutal.”
Crypto trading fees were about 0.3 percent.
Even ten trades meant a 3 percent loss. One hundred trades? Then you were down 30 percent of your principal.
The more you traded, the more the money leaked away in fees, swelling like a snowball.
On the other hand, the more people churned through short-term trades, the more the exchange made.
“That’s why BitUp climbed all the way to fourth in the world.”
“Koreans do seem to love short-term trading.”
“We are the people of scalping, after all.”
In the past, short-term trading referred to day trading—buying and selling within a single day.
But these days, when people said short-term trading, they usually meant scalping: trades measured in seconds and minutes.
Lee Dong-ho absentmindedly brushed beneath his nose. “For example, on the last day of the final liquidation trading period for a stock that’s being delisted, they hold the greatest scalping tournament on earth, and you can see trading volume shoot up to thousands of times the normal level. Watching people scalp right up until one second before delisting is a sight to behold.”
“……”
“But lately, short-term trading in the stock market has been on the decline.”
“Why is that?”
“Because everyone went to the coin market.”
“……”
If you stare at a coin chart and then glance at a stock chart, it feels like you’re looking at a frozen frame. Any investment worth its salt should bounce around several times a day, shouldn’t it?
As Edward looked back down at the report, he noticed something else odd.
“This part is strange too.”
“What is?”
“Why are the holdings of Vantcoin and Eldereum so small?”
The combined market cap of Vantcoin and Eldereum accounted for 60 percent of the total crypto market cap.
So naturally, their share in the won market should have been similar—but astonishingly, it was only 27 percent, less than half of the global market.
“Ah! Korean crypto investors don’t really like Vantcoin and Eldereum.”
“Why not?”
Lee Dong-ho said it with perfect confidence. “That level of volatility doesn’t satisfy our needs. What are you going to do with Vantcoin—double your money? But if you catch the right altcoin, you can make ten times your money.”
Edward looked flustered. “No, but if something can go up tenfold, doesn’t that mean it can also crash by 90 percent?”
“Come on, what does that matter?”
“Then what does matter?”
“The dream and hope that I can hit it big in a market where everyone else loses, too.”
Edward thought for a moment, then asked, “Spending hundreds of thousands of dollars on random boxes in mobile games just because you don’t know what’ll come out, and the trading volume and altcoin concentration in crypto too... What kind of country is this, a nation of gambling?”
“……”
* * *
The amount of Pether deposited into the PN Protocol had climbed past 45 billion dollars.
That meant 30 percent of the Pether in circulation had been locked up there.
A 5 percent interest rate over three months wasn’t especially tempting for retail investors. After all, putting in 10,000 dollars only earned you 500.
But for institutions managing large sums, it was a different story.
Deposit 10 million dollars, and in just three months you would lock in a guaranteed profit of 500,000 dollars.
That was why institutions already invested in crypto were gladly staking their Pether in the PN Protocol. More than 80 percent of the 4.5 billion dollars deposited there came from institutional money.
David told me, “The fact that Pether’s assets are insufficient doesn’t necessarily mean Pether will collapse.”
“True.”
It was the same reason banks didn’t necessarily face bank runs even when their reserve ratio was only 7 percent.
“As long as everyone doesn’t try to redeem Pether all at once, there shouldn’t be a problem.”
Even if 10 percent were sold off at once, they should be able to absorb it. The same went for 20 percent or 30 percent.
But...
What if it were 50 percent? What if it were 70 percent?
Could it really be defended?
As those fears spread through the market, demand surged from people trying to convert Pether back into dollars.
The safest position for anyone currently holding Pether was to redeem it for dollars.
But if they had staked it in the PN Protocol, unstaking was difficult.
Continue Capital had already loaned out all the Pether that had been staked, so even if they wanted to return it, there was no way to do so.
Fortunately, the PN Protocol had one condition attached to early unstaking.
If you unstaked before the term expired, 1 Pether would be returned as 0.2 Penny. Naturally, no interest would be paid.
To put it another way, it was like putting 1 million won in a fixed deposit and only getting 200,000 back if you broke it early.
In normal circumstances, no one would do something that insane and throw away 80 percent of their deposit.
But if Pether was about to turn into trash, the story changed.
Rather than sit there and watch it become zero, it was better to salvage at least 20 percent.
David looked at me and asked, “Why did you even put in an unstaking condition?”
“Without one, the people who staked would just have to sit there and watch their assets vanish in real time.”
But this way, even in the worst-case scenario, they could recover 20 percent.
From our side, on the other hand, it meant paying out money we didn’t actually need to give. Twenty percent of 50 billion dollars was 10 billion dollars.
“Penny is only just beginning. It’ll eventually become the most widely used cryptocurrency in the world, so we can’t make too many enemies from the start, can we?”
“Is that really all there is to it?”
So he’d noticed after all.
I smiled. “If we do it this way, won’t all the institutions that staked Pether in the PN Protocol end up on our side?”
* * *
Goldenbaum Sisters.
An emergency meeting was underway at this hedge fund in the City of London.
They were a crypto-focused investment firm, and they had staked a massive 420 million Pether in the PN Protocol. One wrong move, and they’d be forced to watch the collapse without being able to do anything.
Voices burst from all sides.
“Did those bastards plan this from the beginning?”
“Using DeFi to set up a short?”
“The situation is bad.”
“Institutions are rushing to convert their Pether into dollars.”
“Pether Limited says there’s no problem at all. They claim the peg is being maintained normally.”
“The investor complaint lines are ringing off the hook.”
The CEO of Goldenbaum Sisters, Jamie Goldenbaum, who had been listening quietly, finally spoke.
“So what do you think we should do?”
At that, everyone who had been talking all shut up at once.
Every face in the room was serious.
When Empty Pool Research had pointed out the problems with Pether, nobody had paid much attention. But Continue Capital was different.
Until now, Continue Capital had never failed at a short sale.
No—more than that, everything it touched collapsed. Not long ago, it had even brought down Facenote, one of the Big Five companies in the United States.
So would Pether really stay intact?
They had thought they were safely pocketing 5 percent, and now it looked like they might lose 95 percent instead.
No, wait. If they can still get back 20 percent, then the loss is “only” 80 percent?
Either way, at that level of loss, the company might have to shut its doors.
Silence settled over the room.
Then one man cautiously raised his hand.
“Um... may I say something?”
Fluffy blond hair, a skinny frame, a face with prominent cheekbones, and pale skin.
He looked like a shy young man who had borrowed his father’s suit.
His name was Josh Ephron.
He was a new hire who had joined Goldenbaum Sisters not long ago.
As everyone’s attention locked onto him, he spoke.
“I think we should liquidate other assets and go ahead with a 420 million dollar short on Pether.”
That left everyone stunned.
“What? What are you talking about?”
“Are you serious right now?”
The CEO of Goldenbaum Sisters asked calmly, “And your reason?”
“Ah, yes. It’s like this. The way Continue Capital is attacking Pether is similar to an attack on a foreign exchange market. If it were a foreign currency, then even if the attack succeeded, it would only crash by a few dozen percent at most. Unless a country actually collapsed, there’d be no way for the currency’s value to go to zero.”
“Fair enough.”
“But Pether is a dollar-redeemable stablecoin. If redemption proceeds normally, it’s worth 1 dollar, but if redemption is halted, its value will fall to zero.”
“So?”
“First, let’s consider the case where Continue Capital wins. Then Pether goes to zero, and we can unstake from the PN Protocol and recover 20 percent—84 million dollars’ worth of Penny. But if we had taken out a 420 million dollar short on Pether, we would have made over 90 percent on that position, which means we’d end up with more than 10 percent profit overall.”
Everyone looked shocked.
Josh went on. “Now let’s consider the case where New Currency Enterprise wins. Then Pether still holds its 1-dollar value, and in three months we can safely recover our principal plus interest from the PN Protocol. Since Pether is a stablecoin, even if the short fails, our cost is only 5 percent. Wouldn’t the interest cover the loss?”
“……”
Everyone was so stunned that no one could say a word.
Because they had staked Pether in the PN Protocol, the ironic truth was that they now had to take an even more aggressive stance against Pether’s price.
If they succeeded, they could make a decent profit. If they failed, they could still avoid a loss.
The CEO of Goldenbaum Sisters nodded.
“Given the situation, that’s the best option.”
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