FINALLY! Luna Bull Mike Novogratz Opens Up About Crash

FINALLY! Luna Bull Mike Novogratz Opens Up About Crash

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FINALLY! Luna Bull Mike Novogratz Opens Up About Crash

Terra Luna and UST had one of the biggest falls from grace that we’ve seen in recent crypto history. Terra Labs with its more than 1.8m users, a top 10 coin on, and a top 5 finance app in South Korea lost approximately $60 Billion in market capitalization in just a matter of days causing a ripple effect throughout the market. Investors both big and small lost enormous sums of money, including Binance, one of the biggest crypto exchanges. CEO of Binance, Changpeng Zhao, reported that Binance’s 15 Million Luna Tokens were at one point with $1.6 Billion just in April. Now it's worth just worth over $3,000. Analysts and pundits are calling this the “Lehman Brothers event” of the crypto market. One of the biggest believers in Terra Luna and crypto in general Mike Novogratz of Galaxy Digital, went uncharacteristically silent after the crash but finally addressed the pink elephant in the room. Novogratz has been a proponent of Terra for quite some time, calling Terra one of “the canaries in the coal mines of what else is going to happen” and co-leading a $25 million funding round in the Singapore-based Terraform Labs. Novogratz’s conviction in Luna was so strong, that he called himself “Officially a Lunatic” and got a LUNA-themed tattoo.

After the UST de-pegged from the dollar and Luna fell to a fraction of a penny, Novogratz returned from a 10-day hiatus on Twitter to address what happened. Novogratz tweeted out;

After much thought, it’s time to talk about last week and, more importantly, the weeks ahead.

This tweet was accompanied by a link to a letter written by Novogratz on his company's letterhead, addressed to shareholders, friends, partners, and the crypto community.

The first paragraph stated;

“There is no good news in what happened in markets or to the Terra ecosystem,” the investor detailed in his blog post. “In Luna and UST alone, $40bn of market value was destroyed in a very short amount of time. Both large and small investors saw profits and wealth vanish. The collapse dented confidence in crypto and [decentralized finance]. Whenever money is lost in such an abrupt fashion, people want answers. I am going to try to add some insights to the ongoing discussion.”

While analysts and pundits called Terra’s operation a ponzi scheme BEFORE the crash (you can find link sources in the description), Novogratz believes the collapse was a systemic issue tied to the worsening global economy, causing a ‘run on the bank’. Novogratz stated;

To start, the global macro backdrop has been brutal for all risk assets this year. Growth stocks
with negative cash flow are down as much as 50-70% this year. Crypto has been under pressure,
with core assets like BTC and ETH down about 58% each from all-time highs– and altcoins are
down an average of 80% from all-time highs.

This macro backdrop put pressure on Luna and the reserves held to back UST. UST’s growth
had exploded from the 18% yield offered in the Anchor protocol, which eventually overwhelmed
other uses of the Terra blockchain. The downward pressure on reserve assets coupled with UST
withdrawals, triggered a stress scenario akin to a “run on the bank.” The reserves weren’t enough
to prevent UST’s collapse. With hindsight things always look clearer. My tattoo will be a
constant reminder that venture investing requires humility.
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