Resource: Cryptopotato.com
7 months ago
Date: 18 May 2022 - 19:55

Mike Novogratz billionaire investor and CEO of Galaxy Digital has issued a statement addressing the recent meltdown of the Terra ecosystem. He highlights lessons hes learned from the situation but reinforces his faith in the crypto economy as a whole.The Idea That FailedIn a letter to shareholders and the crypto community Novogratz lamented the loss of over 40 billion in wealth suffered by LUNA and UST investors alike. The UST stabilization mechanism meant to maintain its dollar peg only ended up devaluing LUNA into worthlessness.UST was an attempt at creating an algorithmic stable coin that would live in a digital world8221 wrote Novogratz. It was a big idea that failed.Not only has the collapse dented confidence in crypto and DeFi but it also burned part of Galaxy Digitals own balance sheet. The company bought LUNA in March of 2020 citing significant growth potential as one of South Koreas top finance apps was already built upon Terra.However Novogratz claims that the Federal Reserves tightening in the face of recordhigh inflation has caused the crypto market to unwind. This he claims placed immense price pressure on LUNA the reserve asset backing UST ultimately ending in a bankrun style death spiral for the coin.While the investor does not believe the bearish macroeconomic backdrop will end anytime soon he remains confident in the crypto ecosystem. That said he restressed some core tenets of crypto investing to stay cautious including diversification and risk management.Many in the online community awaited Novogratzs commentary on the matter who famously had a LUNAthemed tattoo emblazoned on his arm in January. My tattoo will be a constant reminder that venture investing requires humility he said.Novogratz clarified that his companys treasury does not utilize algorithmic stablecoins.ReExamining Terras CollapseMost top figures within the Terra ecosystem agree with Novogratz that the network unwound due to its flawed UST stabilization mechanism. However many also theorize that UST was initially depegged because of a deliberate short attack executed by a handful of wealthy actors.A post retweeted by Terra cofounder Do Kwon claims that nearly 300 million UST were dumped on Curve finance prior to its destabilization. This was followed by numerous shorts on LUNA and Twitter posts echoing negative sentiment about the cryptocurrency.

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