Jun 24
Studying the aftermath of Terra/Luna collapse..
$40B was wiped out of the crypto market with the fall of Terra/Luna.
Much has been said about the crypto nuclear explosion and its once high-flying founder Do Kwon.
Police reports have been made, investors are suing, the Korean government is stepping in with their “Grim Reapers” to investigate on financial crimes and Do Kwon even managed to launch a Luna 2.0 that is no longer algorithmically backed.
It’s a nasty pimple on crypto’s already rocky and cratered complexion.
But what really happened after that cryptogeddon?
Retail folks got hurt, bad.
Some lost entire fortunes, others borrowed greedily to stake into Anchor only to watch it evaporate overnight and some even committed suicide from the aftermath.
Governments and regulators started stepping in.
Hard questions are now being asked by important people in important positions.
Regulatory scrutiny will increase inevitably.
Many will lose faith not just in certain coins but in crypto as an industry.
Nothing new for crypto.
Even the original gangster Bitcoin, has seen much worse and survived.
I wrote about the collapse in detail in my previous posts but I do want to answer, at least partly, the question of: what happened to the other businesses that moored their boats to Terra/Luna.
Looks like the cat is out of the bag.
“Hashed Wallet Takes $3.5B Hit, Delphi Digital Discloses Loss After Terra’s LUNA Collapse”.
Hashed, a fund based in Seoul, invested in TeraForm Labs’s $25M round in 2021 and were very, very exposed to the Luna token.
Delphi Digital has nearly 13% of their net assets in Luna at its peak.
But the most surprising was a YC company (Stablegains YC W22) that lost ALL their customer’s money.
“Stablegains a registered company in US was taking USDC and USD via wire from customers promising them 15%, put it all into Anchor without telling them, they have lost $42M of 5000 Customers.”
See what they did there?
They promised customers 15% interest, took the money and put it into Anchor Protocol which yielded them 19–20%.
They pocketed the difference.
Its a paltry sum if you are investing a thousand dollars or using your lunch money.
But with good marketing and strong signals (like being backed by YC), they managed to convince customers to invest in them.
5% of $42M is around $2.1M for literally twiddling thumbs and putting the money into Anchor.
They might have taken a smaller fee and so on.
Of course it is more complicated than that.
They have to worry about security, compliance, marketing, account management, diversifying and so on.
Speaking of diversifying.
That is exactly what they didn’t do.
They dumped ALL of the funds into Anchor and hoped for the best.
So you can imagine what happened when Terra/Luna crashed and burned.
Stablegains was no longer stable.
All the UST that they were staking into Anchor were worth exactly nothing.
They went on to scrub their websites and delayed withdrawals, much to customers’ dismay.
I really don’t know how they are going to get out of this mess.
This is a lesson for founders to be more prudent and accountable for their actions.
Just because you can, doesn’t mean you must.
Don’t take unnecessarily high risks if you can afford not to.
And always stick to the old rules like diversification and patience.
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Will crypto survive this bear cycle?
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#startups #business #startupx #growth #success #socialmedia #culture #entrepreneurship #strategy #dokwon #luna #terra #terraformlabs #stablecoin #lunacrash #cryptoland #ust #cryptogeddon #bitcoin #deathspiral #stablegains
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