Bear Market Lessons – May 2022
In April 2022, I had already exited the crypto market, converting all my Ethereum holdings into USDT. At the time, I compared USDT and USDC and concluded that in the future, I might prefer USDC as my stablecoin of choice to park funds after exiting investments. With that done, I was waiting patiently for the next big bear event.
Right before the drop, multiple U.S. Federal Reserve reports pointed toward rising inflation:
Fortune article on inflation and market reactions
I remember that morning clearly. It was 5:50 AM Bangkok time on May 10, 2022. I was reading the news on my Samsung S22 via Microsoft Start when I saw Bloomberg’s headline:
“Bitcoin’s Unraveling Tops 50% From Peak With Drop Below $31,000.”
Immediately, I checked my Binance widget, and it was clear: we were at the start of another bear market—not just in crypto, but across the financial world.
But this bear market turned out to be much worse than I had expected.
Soon after, Terra Luna and its algorithmic stablecoin UST collapsed. UST had been one of the most high-profile algorithmic stablecoin projects, widely considered a success—until it wasn’t. Its failure wiped out over $45 billion in market value, shaking investor confidence across the entire crypto ecosystem. The crash showed how fragile unregulated and algorithm-driven financial products can be, especially when tested by extreme market conditions.
What Did We Learn?
• Why didn’t the promise of 20% returns raise more red flags?
• Were people trying to squeeze out gains before it was too late?
• Or was it simply too good to question—until it wasn’t?
UST acted like a magic cloak, masking risk behind the veil of algorithmic stability. But stabilizing currency isn’t a new idea—humans have tried to manage monetary value since the early days of foreign exchange. What was new here was the blind faith in code over fundamentals.
In hindsight, it’s worth contrasting traditional stablecoins like USDT and USDC with algorithmic ones like UST or Iron/Titan. The difference in structure makes a world of difference in stability.
Final Thoughts
Anything can crash. And when a technology is new and trending, hype often overshadows understanding. Many news outlets and influencers don’t help—they follow trends, not truths, often with ulterior motives to pump their preferred coins.
