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The Terra/Luna Hall of Shame – Crypto News Australia

A once-stable, “safe and happy” crypto project called terraUSD imploded earlier this month, sparking an “I told you so” chorus of critics aimed at those unlucky enough from the latest crypto -catastrophe of being fooled – and inked.

It’s hard not to scoff at a decentralized, trustless, permissionless, hard-money financial future utopia that is unsuccessfully turning to quantitative easing (read: kwontitative easing) to survive. But as is becoming increasingly clear, some investors lost most of their life savings to the collapse of Terra and its twin coin Luna.

This begs the question: who encouraged ordinary investors to jump on the bandwagon and show a ticket to the moon? Whose credibility lent shine to a doomed project? Here is the Terra/Luna Hall of Shame from FT Alphaville.

Several parties mentioned in this article have not made any comments after pixel time.

Mike Novogratz

The Peacock © Bloomberg

To do justice to Novogratz, the Galaxy Digital co-founder recently penned a letter preaching humility in the investment world. Before those lessons were learned, Novogratz touted the promise of terra’s great technology and cheered Do Kwon – the once inspiring face of the “LUNAtic” movement.

When Novogratz wasn’t showing his proof-of-LUNAtic ink on Twitter, he oversaw a Galaxy-led funding round for Terraform Labs, the company behind the Terra and Luna debacle. “We always look at these projects because they’re the canaries in the coal mines,” Novogratz said in January last year. Well, quite.

Humility is one thing. Introspection is another, it seems. “The mission of the crypto community – and Galaxy – is not changing. Now more than ever, I firmly believe that the crypto revolution will last,” said Novogratz at the end of a recent shareholder letter.

Sigh.

jump trading

Generic mainframe computer image to denote a mysterious high frequency trader. © Getty Images/Vetta

The support of the well-known trad-fi trading company, Jump Trading Group, has done much to legitimize the Terra ecosystem.

In February 2022, the crypto branch of high-frequency trader Jump Crypto led a $1 billion funding round that allowed the Luna Foundation Guard – terraUSD’s quasi-central bank – to set up a “UST Forex Reserve denominated in Bitcoin”. Yes, really.

“UST forex reserve further boosts confidence in tying market-leading decentralized stablecoin UST,” Jump Crypto president Kanav Kariya said at the time. Today the tone is a bit different.

A breakdown of Jump Crypto’s activity in the Terra community can be viewed here.

Marco di Maggio


In a 2019 white paper, Harvard Business School scholar Marco Di Maggio argued with Terra’s Nicholas Platias that Terra’s dollar peg would prove “very robust.” . . based on 1 million year simulation data”. Three years later, terra’s dollar peg was anything but.

But in a rebuke of Do Kwon’s leadership, Di Maggio told FT Alphaville that the Terra he once knew no longer existed. The Terra he wrote about was planning to peg a stablecoin to the Korean won. His analysis of how that Loads on the system are therefore no longer relevant, he argued.

Do Kwon decided to launch a borrow-and-borrow protocol called Anchor — Terra’s first attempt at entering the decentralized finance market. The original idea was to allow users to borrow the Terra stablecoin for other transactions within the ecosystem. In the original design, the interest rate paid to lenders should have been a market rate determined by loan demand. This would have made it sustainable without jeopardizing the overall design.

Instead, to attract attention and help the company grow, Do Kwon decided to subsidize deposit yields for lenders and set them at 20% APY. All of us on the research team knew that this would create an unstable system with unsustainable supply growth. At such a high rate, Anchor attracted about $15 billion worth of capital. But the growth of underlying capital, now decoupled from credit demand, made the whole system very vulnerable. Depositors could withdraw large amounts of capital, sell them in the market, and cause the stablecoin to lose its peg to the US dollar. We have attempted to explain to Terra leadership the risk and instability of these proposed fixed returns. But with no decision-making authority within the company, our words were ignored.

OK.

binance

©Bloomberg

Misguided venture capitalists and academics are one thing, but one of the industry’s most well-known and influential companies is quite another.

Changpeng Zhao, the CEO of Binance — the dominant crypto exchange behind this story’s headline quote — has had a lot to say about Terra lately, including a joke that the crypto sibling that made it into the top 20 list last month the rich of Forbes has done was now”poor again‘ after the collapse of the project.

More importantly, just weeks before the Terra/Luna ecosystem collapsed in a bunch of zeros and lost life savings, Binance was promoting a TerraUSD lending program as a “safe and happy” investment.

The crypto exchange told the FT that it’s reviewing how it’s doing its advertising, but that’s risking too little too late for the would-be crypto investors reading the exchange’s message on Telegram, which has been viewed over 110,000 times.

Raoul Pal

© True Vision

Raoul Pal, CEO of Real Vision, also drank the terra Kool-Aid. “You can just put money into it. . . Use the network and get 20 percent, and [it’s] fundamentally risk-free,” said the former Goldman Sachs trader-turned-crypto-preacher during an episode of Real Vision that aired last November.

“It’s overwhelming,” he added.

As overwhelming as Terra may have been for Pal back then, he seems didn’t put his money where his mouth was. In a Twitter thread posted on May 10 — just as the fateful terraUSD de-pegging was gaining momentum — Pal tweeted that he “had no idea how it was going to play out” and that he “had no part in the game.” “.

Dude closed his thread suggesting that “markets like to find pain,” a sentiment unlikely to be shared by those who feel the real pain of crippling financial loss. When wounded crypto investors dug up the November video, the backlash was fierce.

The Washington Nationals

Smash it © AP

They may be last in their division at pixel time, but fans of MLB’s Washington Nationals will surely be comforted by the franchise’s February partnership with Terra, which has laid a “groundwork for future blockchain and cryptocurrency applications.”

In a nod to the Houston Astros’ early association with Enron in 1999, a private members’ bar at Nationals Stadium was quickly renamed the Terra Club. It remains the Terra Club today, although it’s unclear if UST will be accepted as a form of payment next season.

In light of Terra’s collapse, the MLB franchise also demonstrated its unique ability to read the room with this tweet.

But who are we missing out on? Which hapless promoters should be on an expanded list? Let us know in the comments below.


Source: Crypto News Austria

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