Pether (11)
Leonard Chang had posted on Twitter.
He was the biggest star in the crypto industry.
And when he reassured investors that nothing would happen, the market briefly calmed down.
In truth, this wasn’t even the first time Pether’s redemption had been suspended, or its peg had broken. Every time some new controversy came up, it would depeg, and then, in the end, it always found its way back to $1.
So when Pether fell to $0.75, the number of people looking to buy it shot up.
* * *
Pether’s price wavered in a tense tug-of-war between $0.7 and $0.8.
Even among experts, opinions were split. Some said Pether was finished and that everyone should dump it immediately, while others insisted it was still worth buying even now.
So it really isn’t easy to break.
Cash and U.S. Treasuries together made up only about 10 percent of Pether’s reserves.
Most of the assets were promissory notes, bonds, and cryptocurrencies including Vantcoin.
The reason they held so much Vantcoin was simple: they had been buying it with Pether they’d printed however they pleased.
The funny thing was that when those Pether tokens were issued, they had no backing at all, but by using them to buy Vantcoin, they’d somehow created backing after the fact.
Come to think of it, it was an absurdly brilliant trick.
It was like making a ten-billion-won check, buying a building with it, and then, if someone questioned how the check would ever be paid, answering, “What’s the problem? I’ve got a ten-billion-won building right here.”
David said, “Dao Group is likely to declare default soon. Its debt has climbed above $300 billion, and its cash has run dry. I heard they asked creditors to accept repayment in the real estate they still hold.”
“That time was bound to come.”
By around this point, the Chinese real-estate bubble had started to burst.
When people think of property development, they usually imagine redevelopment or reconstruction, but Chinese real-estate development had been about building an entirely new city from nothing, in the middle of an empty plain.
That approach had been a huge success, and construction companies had made staggering amounts of money.
But then the property market cooled, and units stopped selling. It wasn’t widely reported in the media, but some cities had even been built where not a single person lived.
I thought back to my first life.
Contrary to the expectation that the Chinese government would step in to save them, Dao Group ultimately couldn’t repay its debts and went bankrupt.
At the time, Pether was said to have lost 20 percent of its reserves, but it hadn’t mattered much.
After that, issuance kept rising steadily anyway.
But this time, things played out a little differently.
Because Pether had dumped so many promissory notes and bonds into the market, Dao Group itself was the one pushed toward bankruptcy.
That was fine by me.
If a company was going to collapse anyway, the sooner it collapsed, the better it was for everyone.
David shook his head. “I figured the reserves would be insufficient, but I never imagined it would be this bad. Who would have thought they’d invested the reserves in such high-risk assets?”
“Frauds always do the same things.”
It had been the same during the Primus disaster.
Back then, too, they’d taken customer assets and recklessly thrown them into high-risk investments, only to lose everything.
Well, in that case they’d had regulations and still lied through their teeth.
David looked at the exchange and said, “The market is holding up better than I expected.”
Vantcoin had now crashed to $40,000, and Elderium had fallen to $4,000 as well.
And as for altcoins... the rest didn’t even need explaining.
If Nasdaq had fallen like this, the whole world would have been sent reeling.
But in the cryptocurrency market, this level of drop happened all the time. Since the market was at least somewhat separate from traditional finance, the impact on the real economy was relatively limited.
But...
When the tide goes out, you find out who’s been swimming naked.
When the market rises, everyone can make money.
Rising prices conceal every problem, and problems stop being problems. Anyone who points them out is laughed at.
But when prices fall, all the buried problems start surfacing.
If I remembered correctly, from this point on, everything would begin to explode.
And the biggest of those explosions would happen in Korea.
* * *
For years, the cryptocurrency market had been little more than the Wild West.
That meant it was both a land of opportunity and a lawless frontier.
To get listed on the stock market through an IPO, companies had to disclose all sorts of information. But to get listed on a crypto exchange through an ICO, all they had to do was publish a white paper.
And so countless cryptocurrencies sprang up like weeds.
When BeagleCoin was created to mock existing coins and suddenly became popular, copycats flooded in with HoundCoin, DobermanCoin, RetrieverCoin, and more.
The most famous of these was RetrieverCoin.
It had been launched as a project that promised to issue NFT pedigree certificates for dogs.
The idea that blockchain would manage the bloodlines and pedigrees of hundreds of millions of dogs was more than enough to catch the attention of dog lovers.
The developer published the white paper and a number of related projects on the homepage, and communicated actively through Twitter and Telegram.
At the time of its listing, the coin was worth only 15 cents, but within two months it had shot up to $20.
Then Pether’s trouble began to shake the market, and in just one minute, a flood of 150,000 coins hit the order book. RetrieverCoin’s price collapsed to 1 cent in an instant.
Investors who had lost 99 percent of their assets in an instant were utterly stunned.
When they traced the sell-off back to its source, it turned out to be none other than the developer. The developer’s electronic wallet was empty.
The developer shut down the homepage and Twitter account that had been used for promotion, then vanished.
When furious investors protested through Telegram, the developer mocked them by posting a laughing emoji.
If this had happened in the stock market, it would have been the kind of crime that could easily lead to arrest and decades in prison. But astonishingly, in the cryptocurrency market, it barely counted as a crime at all.
In fact, no one even knew who the developer really was. They had communicated only through Twitter and Telegram the entire time.
There were so many cases like this among scam coins that it was impossible to list them all one by one.
Then, once the market started falling, dozens of coins pulled the same exit scam at once, and investors screamed.
And yet, as always, the exchanges bore no responsibility whatsoever.
* * *
The shock of the crypto crash spread to the stock market as well.
Recently, it had become fashionable for companies to hold part of their assets in Vantcoin. As Vantcoin kept rising, the share prices of those companies had soared too.
The most representative of them was MicroHouse.
It was a company that developed mobile software and cloud-based services, and its market cap had been around $1.5 billion.
What made the company famous was Vantcoin.
Its CEO, Charles Mikelin, believed the future lay in cryptocurrency, and when Vantcoin was at $5,000, he used half the company’s treasury to buy it.
Once that became public, the shareholders were shocked.
He had used money that should have gone toward the company’s future to buy Vantcoin instead!
Enraged shareholders moved to call an extraordinary general meeting and fire him on the spot.
But...
By the time the meeting actually rolled around, the crypto market had rebounded. Vantcoin had tripled to over $15,000, and MicroHouse’s share price had doubled.
The shareholders who had been threatening to remove the CEO all stood up and gave him a standing ovation when he walked into the meeting room.
With the full backing of his shareholders, CEO Mikelin kept buying Vantcoin.
MicroHouse became Nasdaq’s flagship Vantcoin-related stock, and as Vantcoin kept climbing, its share price rose more than eightfold, breaking past $13 billion in market cap.
CEO Mikelin announced his future investment plans and said he would keep buying more Vantcoin, and to do that, he issued corporate bonds.
He went a step further and borrowed against the Vantcoin the company already held, then bought more Vantcoin.
Then he pledged the Vantcoin he had just bought as collateral, borrowed again, and bought even more Vantcoin.
In the end, the amount of Vantcoin they had accumulated reached 130,000 coins.
At an $80,000 reference price, that was worth more than $10 billion, making it the largest corporate holding among U.S.-listed companies.
But when Pether’s redemption was halted, Vantcoin fell to $40,000, and half the company’s assets vanished!
MicroHouse’s stock price was cut in half as well.
To calm the shareholders, he sent out a letter.
“The current correction is temporary. We’ll recover before long. In fact, now is the time to buy more.”
As there is no eternal rise, there is no eternal fall.
So if you hold on long enough, Vantcoin might eventually recover too. But that was only true if you could afford to wait that long.
The real problem was the loans taken out against Vantcoin.
Once Vantcoin fell to $40,000, their margin was no longer sufficient, and margin calls began to hit.
The lenders demanded that MicroHouse post additional collateral.
CEO Mikelin first tried to sell part of the Vantcoin holdings to meet the margin requirement.
But the moment rumors spread that MicroHouse might dump a large chunk of its Vantcoin, the price plunged again, and even more collateral was required.
In the end, the lenders moved to liquidate the collateral. They sold off all the Vantcoin they held.
The amount dumped onto the market in that wave was 80,000 coins.
Once that became known, MicroHouse’s market cap, which had once reached $13 billion, crashed by 95 percent and slumped to $600 million.
* * *
As sell orders poured in, the entire market sank into a vicious spiral.
Like a chain of bankruptcies, crypto firms and crypto-linked companies started blowing up one after another. If the market was going to be stabilized, someone had to break that spiral, even if only for a moment.
Investors panicked.
Leonard Chang had asked the banks for loans in order to raise funds while keeping Pether’s redemption suspended.
The money from selling Vantcoin had already been exhausted.
He hurried to sell off the market’s bonds and promissory notes, but with Dao Group in default, trading had effectively come to a halt.
Given enough time, things might have sorted themselves out. But there was no time now.
The only option left was to borrow against the Coinmax exchange itself.
I had to restore Pether’s peg.
The current sell-off in the crypto market had been triggered by Pether’s instability.
If redemption became possible again, the crypto selloff would stop, and then the wave of liquidations would calm down too. If I could just restore Pether to its original state for even one moment, the problem would be solved.
But then...