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Why is crypto crashing? A Q&A on bitcoin, luna and other falling cryptocurrencies

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Why is crypto crashing? A Q&A on bitcoin, luna and other falling cryptocurrencies

The cryptocurrency market is seeing one in all its worst selloffs since a market rally in 2020, sparking panic amongst buyers and elevating questions on why crypto costs have been more and more delicate to gyrations within the inventory market.

Particularly, stablecoins are within the highlight. That kind of cryptocurrency is meant to, as its title suggests, have a steady worth as a result of the tokens are pegged to the worth of a foreign money such because the U.S. greenback or a commodity akin to gold, offering relative insulation from excessive volatility.

Even stablecoins have crashed. What’s behind all this? What’s forward for the crypto market? We talked to finance and funding specialists for a broad overview.

Why are bitcoin and different cryptocurrencies crashing?

Market specialists say two foremost elements are driving the current stoop within the cryptocurrency market: strikes by the U.S. Federal Reserve to fight excessive inflation and stabilize markets, and the implosion of terraUSD, a kind of so-called stablecoin.

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  1. Macro-econ: To clarify the primary issue, let’s begin with some macroeconomics. In early 2020, the Fed reduce rates of interest, or the price of borrowing, to handle the pandemic-driven financial stoop, primarily pumping more cash into households and companies.

    The consequence down the road was inflation rising to the very best stage in 4 many years. One other consequence: ample liquidity drove costs up throughout most asset lessons, together with conventional inventory markets and cryptocurrency markets, as merchants invested their cash anticipating stronger returns.

    Rising costs imply financial ache for individuals — as our incomes aren’t, for essentially the most half, rising in tandem with costs — they usually threaten financial progress extra broadly. For harm management, earlier this month the Fed raised rates of interest by 50 foundation factors, or half a share level, the largest improve in about twenty years. The Fed can be within the technique of lowering the cash provide to additional curb inflation creep and can proceed to hike charges sooner or later.

    Excessive inflation and, in flip, rate of interest hikes make buyers nervous as a result of they’ll crimp enterprise progress and have an effect on firm earnings, to allow them to encourage sell-offs. The Customary & Poor’s 500 and Nasdaq inventory indexes have fallen greater than 20% because the starting of the 12 months. In the meantime, the market cap of the cryptocurrency market has greater than halved from its peak of round $3 billion in November to $1.3 billion now, in line with information gathered by CoinGecko, which analyzes the digital foreign money market.

    The value of bitcoin dropped beneath $30,000 earlier this week, for the primary time since July. Bitcoin is the world’s largest buying and selling cryptocurrency and accounts for greater than 40% of the market.

  2. TerraUSD: What’s actually caught the attention of crypto watchers now’s terraUSD, identified by its record title as UST, and its impact on its sister token, luna.

    These are two cryptocurrencies created by the Terra community, a blockchain undertaking developed in South Korea.

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What are luna and UST cryptos?

Stablecoins, together with terraUSD and luna, have been touted as a category of crypto asset that, because the title suggests, supplied extra stability throughout market volatility.

The worth of the UST token is pegged to the U.S. greenback, which signifies that always the worth of 1 UST ought to be $1. If the worth plunges beneath a greenback then the coin could possibly be “burned” and exchanged for a greenback’s price of luna.

Luna began buying and selling in Could 2019 at roughly $3 and touched an all-time excessive of round $116 in April, in line with CoinGecko information, at a time when most different large-cap cryptocurrencies have been falling.

Earlier this week, UST broke the peg towards the greenback and, for the primary time, the worth of 1 UST fell to lower than a greenback — it crashed to lower than 30 cents.

What occurred to luna? Why is {that a} huge deal?

As the value of UST crashed, giant luna holders cashed out, inflicting the provision of luna tokens to leap, and its value to crash. Luna misplaced 99% of its worth Thursday.

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In keeping with Bloomberg Intelligence, luna’s sharp worth decline seemed just like the worst day for a monetary product ever seen and it prompted cryptocurrency exchanges to delist the coin, bringing its commerce to a halt as there was no liquidity out there.

A doable motive for the severity of this crash is the actual pricing construction of the UST token, mentioned Edward Moya, a senior market analyst at OANDA, a overseas alternate platform.

The UST operates in a different way from different stablecoins, akin to tether, that are backed by a government-backed foreign money or industrial papers. It’s an algorithm-based stablecoin and makes use of an advanced methodology, with the assistance of luna, to make sure its worth is maintained towards the greenback.

“Most stablecoins will maintain precise belongings to operate however the algorithmic resolution that UST had was unable to deal with the market volatility that we’re seeing throughout the bond markets. This led to a widespread panic promoting,” Moya mentioned.

Whereas terraUSD’s value slumped to as little as 30 cents, the value of luna got here crashing right down to $0.00001655, from round $81 earlier this week. Terraform Labs mentioned on Thursday night that it halted the blockchain behind the cryptocurrencies and can “provide you with a plan to reconstitute it.”

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The Fed lately flagged issues associated to stablecoins in its biannual monetary stability report, saying that the quickly rising sector, which constitutes roughly 15% of the entire cryptocurrency market capitalization, is susceptible to runs and its dangers might spill into conventional markets.

Is the crypto market now shifting extra just like the inventory market?

The cryptocurrency market, just like the inventory market, has been seeing declines for months. It peaked in November, and with aggressive liquidity tightening alerts by the Fed, all asset markets have since seen a correction.

Market specialists notice that the correlation between conventional markets and the cryptocurrency market might be at an all-time excessive: If one plunges, the opposite will probably observe swimsuit or vice versa.

Sylvia Jablonski, chief govt and chief funding officer of Defiance ETFs, mentioned the correlation with the Nasdaq is at 0.82, up from historic ranges of beneath 0.5 (on a scale of 0 to 1). In comparable phrases, each conventional and inventory markets are shifting in comparable instructions greater than ever, so there’s a spillover impact in investor sentiment.

Consultants are observing a stronger correlation between cryptocurrency and tech shares, which have been among the many hardest-hit shares within the current market stoop.

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I believed crypto was a hedge towards inflation?

Some cryptocurrencies, significantly market large bitcoin, have been touted as belongings whose worth would maintain over time, which implies they might be an excellent hedge towards inflation.

However as inflation has surged, bitcoin’s value greater than halved, making it much less enticing for buyers throughout excessive spells of elevated costs.

Caleb Franzen, senior market analyst at Cubic Analytics, an enormous information analytics agency, mentioned he thinks bitcoin will proceed to behave as an inflationary hedge over an extended time frame. Some modeling initiatives that bitcoin’s worth might drop to a spread of $19,000 to $21,000 within the brief time period, he mentioned, however within the longer span of 5 to 10 years, it might show to be an excellent hedge.

What occurs subsequent?

Is crypto headed for a Lehman second? (Lehman Bros. is the massive funding financial institution that went underneath in 2008 and was a participant within the monetary disaster.)

“Not but. You’ll be able to by no means say by no means, particularly in cryptocurrency,” OANDA’s Moya mentioned. “Although there are potential catalysts, there doesn’t appear to be a scientific danger.”

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Franzen believes {that a} substantial rise within the worth of bitcoin could possibly be a precursor to an increase in inflation as occurred between March 2020 and November 2021.

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What Caused the Air India Plane Crash? Here’s What Investigators Are Examining.

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What Caused the Air India Plane Crash? Here’s What Investigators Are Examining.

Atul Loke for The New York Times

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Investigators have begun sorting through the wreckage of Thursday’s plane crash in India, the nation’s deadliest in three decades. It could take months before a definitive explanation emerges, but videos of the accident and other evidence have begun to offer clues about what may have brought down the Air India flight, killing more than 260 people.

Here are some questions that investigators hope to answer in days and weeks ahead, according to aviation safety experts.

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Were the wing flaps and slats properly extended?

Thursday’s crash occurred moments after the plane departed the airport in Ahmedabad, India. A short, blurry video showed what appeared to be the start of a routine takeoff, aviation safety experts said. But soon after leaving the ground, the plane, a Boeing 787 Dreamliner, began to descend before crashing and exploding.

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At its most basic, the crash reflected a failure to meet the fundamental requirements of flight. To fly, a plane needs to generate enough lift to overcome gravity and enough thrust to overcome the air’s resistance, known as drag. The flight on Thursday seemed to fail on both accounts.

“There appeared to be an issue with the thrust and there appeared to be an issue with the lift,” said Anthony Brickhouse, an aviation safety consultant. “And we unfortunately saw what the result was.”

When an airplane takes off, flaps at the rear of the wing and slats at the front are typically extended to provide more surface area to create more lift as the plane gains speed.

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“Just given the fact that this was a takeoff accident, begs the question regarding the settings of the wing slats and flaps, which is critical for taking off in a big jet that’s fully loaded with fuel,” said Jeff Guzzetti, a former accident investigator for the Federal Aviation Administration and National Transportation Safety Board.

It was not clear whether those flaps and slats were properly extended. If they weren’t, experts said, investigators will want to know why. Did the pilots choose not to extend them or fail to do so? Was there some kind of mechanical failure that prevented the pilots from extending those parts? Even if the slats and flaps were extended, it would be difficult to know if they were appropriately deployed because they can be configured differently for different situations. It’s also possible that they were extended but retracted too soon.

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“The video is just too grainy, but that is something that’s clearly recorded in the flight data recorder,” said Mr. Guzzetti. “So hopefully, the recorders will tell the tale.”

Why was the landing gear down?

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The video shows that the landing gear remained extended throughout the plane’s ascent and descent, which experts described as unusual. Landing gear creates drag, so retracting it is typically one of the first actions a plane’s pilots take after the plane is off the ground.

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Source: Newsflare, via Associated Press

The New York Times

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But experts said the pilots may not have retracted the gear for a number of reasons. A mechanical problem may have prevented the pilots from lifting the landing gear, for example. Or the pilots may have been preoccupied with another, more pressing problem.

“The airplane will climb fine leaving the gear down,” said Shawn Pruchnicki, a former accident investigator at the Air Line Pilots Association and an assistant professor of aviation safety at Ohio State University. If something else had gone wrong in the plane, the pilots may have focused on addressing that first, he said: “You have bells and alarms going off — there’s all kinds of stuff happening.”

Were there engine problems?

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Engines provide thrust and investigators will want to know if they failed for any reason. An engine breakdown sometimes comes with telltale signs — smoke, fire, a flash — but experts said none of those are clearly apparent in the blurry videos of the crash.

One video shows what appears to be a dust cloud shortly after the plane leaves the ground. That could have been caused by an engine or it could have been caused by the wingtips disturbing the air, experts said.

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Source: Reuters

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The New York Times

Planes are designed to fly with just one engine, a situation that commercial airline pilots train for “excessively,” Mr. Pruchnicki said, adding that he believed the 787 Dreamliner probably didn’t experience a single engine failure, but both engines could have malfunctioned.

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If that were the case, it would have happened at the “absolute worst time,” said Mr. Pruchnicki. A double engine failure occurring shortly after takeoff, when the plane was only several hundred feet off the ground, would have left the pilots without sufficient time to respond to the emergency.

“You can’t manage a double engine failure that close to the ground,” he said, recalling the 2009 “Miracle on the Hudson,” when a US Airways jetliner landed in the Hudson River after the aircraft lost power in both engines after striking a flock of birds. “These guys were in a residential area, a business area. They had no place to go either. There was no field to set it down gently. So, unfortunately, they ended up in buildings.”

A failure of both engines could have many causes: a bird or drone strike, inadvertent fuel shut-off, issues with automated thrust management. There is no evidence that these problems played a role in Thursday’s crash.

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“There’s easily a hundred different explanations of possibilities,” Mr. Pruchnicki said. Analyzing the flight data recorder and inspecting the engine itself would provide an “unbelievably forensic” look at what happened, he added.

What was happening in the flight deck?

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Investigators will also probably be sharply focused on what unfolded in the flight deck, or cockpit, before the crash.

There were two pilots on the Air India flight, which is typical in commercial aviation, with one pilot in charge of flying and the other providing support, monitoring the plane’s various systems. Were those duties split appropriately? What were the pilots saying to one another? And did they perform their jobs adequately?

Planes are also equipped with various warning systems to alert pilots of problems. Investigators will want to know if those warning systems worked as intended.

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“Did they get the warning that they were supposed to receive or were they misconfigured? If they didn’t get a warning, then why? If they did, what did the crew do when they heard it?” said Mr. Guzzetti.

What other sources of evidence are there?

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Investigators will also be on the hunt for more evidence.

Typically, they scour and analyze wreckage for clues and collect testimony from witnesses, such as airport personnel who may have seen the crash. They will also look for additional videos.

But their most important task will be recovering the wealth of technical information and audio recordings contained in the plane’s black boxes: a flight data recorder and a cockpit voice recorder, both of which have been recovered.

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“Once they have that information, it will help focus the investigation into specific areas,” said John Cox, a former airline pilot and chief executive of Safety Operating Systems, a consulting firm. “So right now, it’s about gathering of documentation and evidence and keeping an open mind.”

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Anne Wojcicki's nonprofit wins bid for genetic testing company 23andMe

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Anne Wojcicki's nonprofit wins bid for genetic testing company 23andMe

A nonprofit controlled by Anne Wojcicki, former chief executive of 23andMe, has won the bidding process to buy the bankrupt genetic testing company.

If approved by the court, the sale would put Wojcicki back at the helm of the company she co-founded and previously attempted to take private.

23andMe, which helped popularize at-home DNA test kits and was once valued at $6 billion, declared Chapter 11 bankruptcy in March.

The potential sale of the company has raised questions over privacy standards for genetic data, which experts say is uniquely sensitive, immutable and irreplaceable if stolen.

More than 11 million customers have given DNA samples to 23andMe, putting a trove of genetic information under the company’s control.

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Wojcicki’s nonprofit TTAM Research Institute agreed to comply with 23andMe’s privacy policy and committed to adopting additional consumer protections, according to a 23andMe statement. TTAM has offered $305 million to buy 23andMe and the company’s assets.

“I am thrilled that TTAM Research Institute will be able to continue the mission of 23andMe to help people access, understand and benefit from the human genome,” Wojcicki said in a statement. “We believe it is critical that individuals are empowered to have choice and transparency with respect to their genetic data.”

New York-based drug maker Regeneron Pharmaceuticals was poised to buy 23andMe before the bankruptcy judge reopened the bidding process to allow for a bid from TTAM. The final round of bidding was conducted by the U.S. Bankruptcy Court for the Eastern District of Missouri and concluded when Regeneron declined to make a higher bid.

Dozens of states have filed a joint lawsuit against 23andMe to block the South San Francisco-based company’s sale of its customers’ genetic data without explicit consent.

“This isn’t just data — it’s your DNA,” said Oregon Atty. Gen. Dan Rayfield in a statement. “People did not submit their personal data to 23andMe thinking their genetic blueprint would later be sold off to the highest bidder.”

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Push to block L.A.’s tourism wage hike has been misleading, union alleges

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Push to block L.A.’s tourism wage hike has been misleading, union alleges

The union representing Southern California hospitality workers has accused a group of airlines and hotel businesses of using underhanded tactics in support of a petition to overturn a city ordinance boosting the minimum wage in Los Angeles.

The hospitality union that pushed for the wage boost, Unite Here Local 11, on Wednesday filed a complaint with California Atty. Gen. Rob Bonta and Los Angeles City Atty. Hydee Feldstein Soto, alleging that petition circulators hired by the campaign have made false statements and misrepresentations to convince voters to support the measure.

“We write to alert your offices to serious misconduct and probable violations of law,” the letter said. “Knowingly making false statements about a ballot measure petition is a misdemeanor, but even more importantly, it undermines the integrity of our electoral process.”

The business coalition is seeking to overturn a city ordinance hiking the minimum wage of hotel and airport workers in Los Angeles to $30 an hour by 2028, contending that it will hurt the industry and thwart the development of new hotels.

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The group, known as the L.A. Alliance for Tourism, Jobs and Progress, filed paperwork at the end of last month to force a citywide vote on the wage boost, hoping to persuade voters to repeal the ordinance.

Cydney Hargis, a spokesperson for the group, in turn accused the union of unsavory tactics and alleged that signature gatherers have been intimidated by observers.

“This referendum is a last line of defense against an economic crisis for the tourism sector, and the petition makes crystal clear what voters are being asked to sign. Period,” Hargis said.

The group needs to gather about 93,000 signatures by the end of June to qualify the measure for the ballot in an upcoming election.

The effort is funded by Delta Airlines, United Airlines and the American Hotel and Lodging Assn., according to campaign documents.

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The union’s complaint describes about a dozen instances in which, it said, witnesses observed petition circulators allegedly telling passersby various inaccurate claims.

At a Ralphs in Woodland Hills, for example, passersby were asked to sign in support of an effort to increase the minimum wage rather than overturn it, the letter alleged.

At a Trader Joe’s in West Hills a circulator said the petition was about opposing L.A. Mayor Karen Bass, and made the false claim that Bass had unilaterally decided that wages would increase, according to the letter.

Times staff writer David Zahniser contributed to this report.

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