The $49 billion meltdown of the algorithmic stablecoin Terra USD (UST) coin and it’s lined token, Luna this month has shown the shaky grounds on which the lofty valuations of stablecoins have been built. Terra which has fallen in value from being pegged to USD to less than 5 cents and Luna which was one of the top 10 stablecoins in Jan is now worth less than 1 cent. The death of Terra and Luna has also led to a $300 billion decline in the crypto industry.
Earlier this month, the Presidents Working Group on Financial Markets (PWG) released a report on Stablecoins. This represents first attempt in designing prudential safeguards for stablecoin issuers.
The consulting company, Bain & Company (‘Bain’) released their second annual Technology report recently. There are 3 main patterns identified; (1) Tech is the main disruptive force now in every sector
(2) Cloud Computing will have an extraordinary impact in coming years causing an unbeatable edge for those companies already ahead (Apple, Amazon, Facebook, Microsoft, Alibaba, Tencent). (3)
Geopolitical and regulatory influences on tech companies are more important than before.
What are Grey Swans and Gray Rhino’s in the world of risk management? Gray Swans are used to describe events that are possible but not considered likely to happen and that have extremely significant impact. Gray Rhino, this is the Elephant/Gorilla in the room and is an event that is highly probable, has high impact but crucially is a neglected threat.
Why this economic recovery from Covid is so different? While there has been a sharp and quick recovery to pre-pandemic levels aided by fiscal support there are notable signs in inflation, wage growth, inventory supplies and spending patterns that make this recovery look very different from the previous economic recoveries.
What is the DNA effect? The DNA effect is the ability of large technology companies to build a competitive advantage by leveraging user generated data in their networks. DNA in this context stands for ‘data-network-activities’ and refers to how the business model of large technology companies (like Google, Apple, Facebook, Alibaba, Tencent aka Big Tech) depends on direct interactions of users which generates lost of data and the ability of these companies to use this data to scale up operations and enter into new areas like financial services.