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The market has been as chaotic as ever, experiencing extreme difficulties passing through the bear market. From bankruptcy of Terra form labs and 3AC to Babel finance margin call of withdrawals, a number of noticeable events have occurred in such a short period of time. When it comes to virtual companies’ asset risk management, a quote by Warren Buffet can perfectly describe it: “Only when the tide goes out do you discover who’s been swimming naked”. Now we all know was skinny dipping.
Could this also be the case in traditional financial markets? Probably not, as bailouts would come into place under the guise of market protection. We already know that the bailouts are only for the selected few. During 2008 subprime mortgage crisis, the greed of Wall Street contributed to the cause of the recession, and it led the U.S. central government to inject funds into bailouts at the cost of middle or lower class people. Isn’t it ironic? While people of working class lost their jobs, the heads of Wall Street took astronomical amount of money into their pockets through incentives and stock options, without taking any responsibility of the crisis. Moreover, people from developing countries ended up being the biggest victims of the market crash. Where should we even begin to address this issue?
What about the case in Covid-19 pandemic? As soon as the crisis hit, they lowered the interest rates, and released the money all around the world which eventually boosted the inflation. The FEDs repeatedly stated that it is only transitory, even when it showed no sign of slowing down, and their stance only aggravated the situation. As a result, the economy was on the verge of going into a recession, recording the highest rate of inflation in the last 40 years. It seemed like the historical bubble in the stock market was coming to an end. Of course, considering the unpredictable and irresistible force of disaster like Covid-19, it’s hard to put the blame on anything or anyone. In retrospect, if fiscal policy was not put in place and interest rates were not lowered, more damage would have been done. Regardless, the burden of the crisis is now shared by the people from all over the world in the form of inflation.
While the chaos is storming through the market, the question remains in who is responsible for all the bankruptcies and liquidations. As there is no such thing as a central institution or bailout, the market tends to clear up faster than the traditional market. Everything is left in the hands of the players. In such times, only the ones with strong basic physical strength will survive. Although the market may be inefficient in the short term, it will be efficient in the long-term (of course it’s not always the case as nothing is promised). Especially, the virtual asset market is still relatively very immature, including its players. In addition, as the market is surrounded by ever-changing innovations, it has massive potential for growth. Considering how Defi, NFT, Web3 and Metaverse are affecting the world today, it’s hard to imagine our life without blockchain technology in the future. The market is going through sufferings and fears at the moment, but such times were usually a chance for enormous profit if capitalized correctly. What we must do now is to view the market as they are, because there is no more time to panic.