The collapse of tokens associated with the Terra ecosystem, stablecoin terraUSD (UST) and Luna (LUNA), has led some major investors to disclose their losses. Two other terra backers detail how their balance sheets have been affected.
Delphi Digital, a research firm and boutique investor, admitted in a blog post that it always had concerns about the structure of UST and LUNA, but believed the substantial assets found in the Luna Foundation Guard would prevent the unthinkable.
"We have always known that such a thing was possible, and we have tried to emphasize the risks of such a system in our investigations and public comments, but the fact is that we have misjudged the risk of a 'death spiral' occurring. We have taken some criticism for this over the past week, and we deserve it. The criticism is fair and we accept it," the company wrote.
The company wrote that in the first quarter of 2021, Delphi Ventures Master Fund acquired a small stake in LUNA worth 0.5% of its net asset value (NAV) at the time. That position grew as LUNA's value increased and the fund added to its holdings, including a $10 million investment in the February 2022 LFG raise that is now worthless.
Although Delphi says it did not sell any LUNA shares, it is now sitting on a "large unrealized loss."
Delphi had once believed in LFG's ability to offset all risks from the LUNA-UST relationship. Ultimately, however, LFG holdings were not enough to be an effective backstop when the price of Bitcoin (BTC) began to fall rapidly earlier this quarter.
"We felt that a high level of external collateralization was necessary over the long term, and we saw this as a way to achieve that goal. Unfortunately, it did not grow fast enough compared to the UST offering, and combined with the decline in the value of BTC reserves, the liability overhang was too large to defend," Delphi wrote.
Hashed hit hard
One of Terra's other prominent backers is Hashed, an early-stage venture fund based in Seoul, South Korea. The company participated in Terra's 2021 venture round, in which it raised $25 million, according to Crunchbase.
"We were immediately impressed with the sophistication of their mechanical design and speed of execution," Hashed wrote of Terra in 2019. "They've done an outstanding job of product development, hiring, facilitating and interacting with the community, and more."
In public, Hashed has said they are "financially sound" and Hashed Ventures has not been affected by the crisis.
Hashed did not respond to an inquiry from CoinDesk by press time, but on-chain data shows that the company had put over 27 million into LUNA in the Columbus 3 mainnet, 9.7 million into LUNA for the Columbus 4 mainnet, and 13.2 million into LUNA in the current Columbus 5 mainnet.
In total, Hashed's losses amount to more than $3.5 billion, based on pricing data from early April.
Local media in Korea report that more than 200,000 investors in the country hold Terra-related tokens.
South Korea's newly elected President Yoon Suk-Yeol is pro-cryptocurrency and has promised a regulatory framework for the asset class, which analysts say is likely to be introduced at an accelerated pace given the scale of the crisis caused by Terra.