THE TRADITIONAL ECONOMICS OF THE MORTGAGE CRISIS PROJECTED TO DECENTRALIZED FINANCE
9 mo (edited)
3 Min Read
Author: @madridbg, through Power Point 2010, using public domain images. criptonoticias
Greetings and welcome dear readers of this prestigious platform, especially to all those users who make life in the community of @Leofinance, the topic that concerns us this time is aimed at making a comparative process between decentralized finance and the behavior of the traditional economy specifically in terms of the actions of the mortgage crisis.
In this sense, for users who follow the blockchain world on a daily basis, it is not surprising that the cryptographic market is plummeting and that it is a mirror of the trades associated with traditional finance, since if we analyze the different indexes associated with the stock exchanges, we will realize that they have a similar behavior to the one executed by BTC as the first asset of the crypto market.
At this point, the case that is being presented with the Celsius Network project, bears some relation to the mortgage crisis assumed in the United States throughout 2008, where already mortgaged properties were subjected to a new re-mortgaging process in the form of collateralized assets and loans.
Thus, the 2008 crisis was based on generating a great growth in mortgage loans, which were taken advantage of by users as a mechanism to take advantage of the low interest rates that the state was providing as a measure to encourage consumption after the 2001 attacks.
Celsius' leaders and investors have been developing similar actions, hence their eagerness to stop withdrawals and generate a kind of financial corral that ended up imprisoning the assets of small, medium and large investors, as a result of the overwhelming and bearish scenario that can be seen in cryptocurrencies and that have destabilized the liquidity of this company or project.
Consequently, the company saw the need to use its funds and those of the users as a reinvestment process in other platforms or protocols that would allow it to generate income, however, this not far-fetched idea ended up generating a disaster with the brutal fall of Bitcoin and cryptomnedas in general, since the bearish scenario ended up liquidating the guarantees of Celsius and causing considerable economic losses.
So that this organization has seen the need to transfer even more collateral to allow sufficient time for the market to recover and losses to decrease, however, in this economic process the confidence of investors has been lost and the most important of this is that the organization Celsius Network has been legally backed as from contracts terms and conditions states that if the company goes bankrupt users lose their assets and without rights to take legal action, so we have been aware by accepting point 13 of these conditions imposed.
Therefore, to clarify the process let us imagine that a person asks for a loan to the bank and the guarantee on this loan is to mortgage the house, now, the re-mortgage process starts when the bank acquires the rights to mortgage the already mortgaged property, the difference is that this new mortgage is made to another financial institution, so that by generating a crash in the market the re-mortgaged assets in the form of stock market collateral lose their value, as is happening to Celsius investors. The advantage of this brutal liquidation scenario was only presented on a specific project and not like what happened in 2008, which transcended all branches of the real estate sector.
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Really the economic crisis in the world is very close, we are facing a situation that apparently we will live in the following months, I think Venezuela has already overcome that stage and we are entering a new one, stage that other countries are starting, the crypto market is in the middle of the correction, and this can be the salvation of many economies in many countries that cling to this decentralized economy.