Both Iron token and Titan token failed due to them being pegged to a stablecoin in their ecosystem
DeFi and crypto market in general is one of the best places to compound interest but understanding it is most important
Diversification is the key concept in portfolio management and it just became easier to manage
Here’s what happened.
Welcome back to the defiboost weekly market recap!
Now we’ve seen in the market a ton of new projects entering the space. You see brand new projects in ecosystems like Ethereum, Binance Smart Chain, Avalanche, Polka Dot, Cardano, all these different chains. But it’s very important in this market, where you have an abundance of projects, and an abundance of options to choose from, to separate out the quality from the not so quality projects.
This week we saw Iron Finance have a massive rug-pull.
Some call it a bank run in the decentralized finance markets, now this does not just affect traditional markets, you saw this during the great depression where essentially everyone was lining up at the banks because they lost trust in these organizations.
I personally think we most likely will see this happening in the crypto industry at some point in the next 10 years. It will be more of a digital version with traditional finance banking system, but with Iron Finance this just already now.
When people saw that it lost its peg, when people saw this downward collapse, it doesn’t matter if a project says “hey this is completely wrong”. When people see it, when the sentiment hits, this is what’s very important, and causes the domino effect. Really what happened this week was that you saw this massive run on Iron Finance, and not only did a Titan token fall, but the Iron token fell. And this is because they used the stable coin in their ecosystem as a peg.
The whole project is a little too far gone at this point. You saw big names involved in this like Mark Cuban and today I really want to break this down, kind of holistically, and then explain to you what are some ways that you can really avoid such things. So whether you’re an active investor or a passive investor in the blockchain ecosystem, it’s very important to ask yourself, how can I manage my risk? How can I do this in a more automated way where I can verify it? So a lot of people had trust in this, and that’s the complete opposite of what we want to do in this blockchain ecosystem.
We want to verify these things, we do not want to necessarily just inherently trust in these things, because that’s why there were run on the banks in in these past market cycles.
It’s very important to look at these things from a historical market perspective, Iron Finance is a great example of what not to do in this space, and Mark Cuban is also a great example of what not to do.
Obviously Mark Cuban has made great investments throughout his career, but I think dabbling in the Defi ecosystem is a scary one. It’s kind of like the wild west. You have these opportunities but at the same time if you don’t know how to have proper risk management, or don’t know how to use tools provided by projects like YDragon, which we’re going to talk about shortly, then you’re going to fall behind compared to other investors.
So I want to highlight this article from CoinDesk: “Iron Finances Titan Token Falls to Near Zero In Panic Selling.”
So again, this is kind of like the run on the bank, when one person sees this happening, and maybe goes and shares it on Twitter, maybe it goes out on a Medium article, whatever it is, the whole madness of crowds kick in and people really get hurt. The ones that get hit the hardest are the people that aren’t constantly monitoring these things.
I personally don’t want to constantly monitor anything. I monitor this to some degree but I’m not on my computer all day. I’m always looking at real estate in whatever country I’m in. There are so many opportunities. But if you have a job, or if you run a business, you probably aren’t able to constantly monitor these different events and that’s why YDragon, a project that essentially automates this for you and automates it in a rustless way — which is the most important thing in removing these problems.
Let’s say you would have wanted to automate your investments 20 years ago and you look okay what happened with Bernie Madoff, this is trust in a person, the largest organizations in history trusted him, and he ran the largest Ponzi scheme in history. Again it all comes down to trust, in this case not being able to verify what he’s actually doing with the money makes trusting such a system unwise. YDragon allows you to verify these things, it allows you to set up automated trading, along with actually earning yield on the token you’re holding. You’re actually able to do all these things within one token ($YDR) so it’s kind of like an index of a lot of the top tokens in the market.
So instead of having to monitor all of your investments, for example maybe somebody told you about Titan, maybe someone told you about Iron just because you can earn high yield on it. Well if you don’t know how to properly manage these risks, and if you don’t know how to do your own research, — which i always talk about on my channel Invest Global- you’re going to fall behind. So if you don’t have the time to do all of this, that’s where using something like YDragon can be very powerful. Essentially you’re able to diversify this risk and go into trading capital markets more efficiently and more confidently.
What happened with Iron is just the worst thing that could possibly happen, considering their tokenomics. Iron Titanium’s token Titan that was once worth 2 billion has fallen to near zero. The token was recently changing hands at highs of 65 dollars, so imagine that, I mean talk about inflation. You see this throughout history. Like we just saw in Venezuela. You see it in some countries in Africa, and Argentina. You’re even seeing it in the West today on a bit of a smaller scale, I think we’re seeing some signs of upfront inflation, even though the federal reserve doesn’t want to talk about it.
Then you look at what happened with Iron compared to an ecosystem where this can literally happen overnight, if you thought that Venezuela was bad look what happened here with Iron; this is a massive problem.
Obviously they didn’t actually inflate the supply but imagine you go to bed and you think “Hey my titan token is at $65,” and you wake up the next day and it’s $0.0035. Massive problem.
Something you always have to keep in mind is the volatility of this ecosystem. You can either ride these volatility waves, use them to your advantage by understanding technical analysis of trading and understanding how to use things like more automated trading strategies like YDragon. Or you can fall victim to this, and sadly that’s what most people do.
Albert Einstein says “The eighth wonder of of the world is compound interest, he who understands it earns it, he who doesn’t pays it.”
So it’s really this double edge sword, that’s really all what investing is — compounding interest.
This crypto market, especially in DeFi, it’s one of the best places to compound interest. That’s one of the features that YDragon has, essentially you can use these tools they have built and by holding the YDragon token you can earn yield off of this and not have to manage all these different private keys with all the varying ecosystems.
You can basically have it all into one, their cross chain is absolutely incredible.
It solves a lot of problems that this example with Iron Titan showcases.
This is just one example of this in the space, I think we will see many more of these in this bull run and over the next 5–10 years. As I said, this space is still somewhat the wild wild west.
Some argue the interest from billionaire investor Mark Cuban has only exacerbated the situation as people discovered his DeFi wallet and alleged that he is the sole provider of TITAN/Dai on the Polygon blockchain.
Now, I’m not necessarily going to say that I agree with that, I think that’s a little bit bogus. Let me know in the comments what you think about this. I personally do not think that’s necessarily what happened. An ecosystem really can’t work if it’s one person providing all the wallets. Now theoretically he could have made thousands of different wallets and put these all up but more likely it was many people using this ecosystem because it was on Polygon.
I was speaking with someone who does a lot of yield farming and makes a lot of money doing it, he said that he saw this coming, having noticed some of the early signs of Iron Titan’s problems. And he’s a young kid, so when Mark Cuban isn’t able to see this coming but young people that understand DeFi and properly understand yield farming are able to say, “hey wait a second this is clearly not going to turn out well,” maybe that’s a good indicator that there is a need for advanced investment tools such as those provided by YDragon.
Titan belongs to iron finance, the project that ran bridging polygons chain on May 18th. If you don’t understand Polygon, it’s basically a layer two scaling solution for Ethereum. Where Ethereum somewhat where falls behind, on the blockchain, on trilemma, is scalability. That’s what Polygon allows you to do is take these transactions on layer two, providing lower fees, etc.
The product is attempting to boot a partially collateralized stable coin known as Iron, so again basically Iron is partially pegged to Titan and also the other percent of it is pegged to USDC, which is a great stable coin. I personally prefer USDC over USDT. I’d be curious what is your favorite stable coin? I hope it’s not iron.
With these coins it’s always important to audit the code, and truly do your own research and come to understand these things because otherwise you can end up like experiencing something like this and that’s again what YDragon is all about, is mitigating this risk.
Due to how the tokenomics of this particular DeFi project functions, when new Iron stable coins are minted the demand for Titan increases driving up its price. Conversely when the price of Titan falls dramatically, as was the case on Wednesday evening, the peg becomes unstable.
Titan’s price went from $65 and pulled back to $60, this caused whales, or large investors, to start selling. This began that bank run, so like I was talking about in the beginning of this article, a bank run is a situation where a large percentage of the users attempt to withdraw their money at the same time, believing that the bank or in this case the protocol will cease to exist.
So this is a great example of people FOMO’ing into a new project, people getting involved in a project without doing the proper research. This is a massive problem if you don’t have the time, if you don’t have the energy, or if you don’t have the capital or the people helping you to research all of the different opportunities out there in the DeFi space.
It’s important to look at different things with which you can essentially index this. People that are a bit more passive in traditional markets look to things like index funds. If you’re a bit like an accredited investor and have more capital you can look at things like hedge funds, or potentially becoming a venture capitalist. But at the same time you have to ask yourself, how can I hedge this? And how can I balance my portfolio?
That’s why I think YDragon is quite interesting. Now this project hasn’t fully released yet but I find it very fascinating. The fact that you’re able to cross chain, have essentially an index of all these top tokens and not have to memorize all these different private keys, all these mnemonics. I think that’s where a lot of people struggle. Yes you can have your ledger wallet set up, you can have your tokens in there, but then you go into some of these other altcoins for example on the avalanche ecosystem, or you go to terra luna, you go to all these different ecosystem and you find yourself needing a different private key for all these different coins and need to know how to balance all these other chains. That’s what YDragon helps you do. It allows you to have it all in one hub, so you can kind of see it as your dashboard.
Every morning I like to look at different indicators when I’m looking at capital markets and YDragon essentially allows you to do this with crypto. It allows you to have this diversification, which I find very interesting. I’m not saying you should put 100% of your money in YDragon, I’m saying there’s always a piece in your portfolio where you can be a bit more passive, giving you a bit more peace of mind.
Do stay up to date with YDragon as we are very optimistic about this project, and subscribe to our channel, since this is all time-sensitive content.
You don’t want to be involved in the next Iron.
Also give the defiboost YouTube channel a subscribe.
And check out my channel Invest Global.
That’s all for this one, if you enjoyed it let me know in the comments. So again as always stay up to date with defiboost and Invest Global and until next time.
Link to the original YouTube Video: https://www.youtube.com/watch?v=Zzo-9y2rSgU&t=601s
Featured CoinDesk Article: https://www.coindesk.com/iron-finance-defi-titan-iron-price-drop
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Originally published on defiboost Medium.