Whose fault is the LUNA debacle?

Plus what I'm doing next

Survive. Survive. Survive.

That is the most important thing, including physical survival (make sure you can afford food, rent, gas, etc) but also financial survival.

The most devastating thing is not losing 30% of your portfolio in a play (i.e. going from $100k to $70k). It’s losing everything & not having a portfolio left to manage or make plays with at all.

(If you’re out of the loop, here’s some background on the UST de-pegging & LUNA, & what might have caused it.)

I’ve had most of my cash in Anchor for awhile (including my emergency fund). I didn’t panic when it initially started to de-peg, but I should have. I sold some ETH to double down on UST at 80 cents instead.

But I woke up this morning to everything much worse. LUNA had fallen another 60%+ & UST was sitting at 40 cents.

UST looked like it was heading straight to 0 & I panicked, predicting it’d keep dropping as the rest of the US woke up & would also panic sell.

I’m not normally a panic seller (sometimes I FOMO buy, but I usually buy the dips instead of selling them). But holding UST had become a bet one could make, I couldn’t treat it as a cash safe haven.

And so, I took a 60% loss, about $15,000. (Also relevant that I’d postponed paying taxes, absorbing interest, to keep the money earning 20% in Anchor longer - not smart in hindsight & a bridge I’ll have to cross in the coming months).

That was 8am this morning.

14 hours later, UST is up to 70 cents (bottomed around 30 cents) - meaning, I’d have lost $7500 LESS if I’d waited to sell it all until now.

But it’s not healthy to live with this regret.

When you make money, you’ll always wish you invested more or timed the top better.

When you lose money, you’ll regret investing or not taking profit.

I should have exited all my UST at the first sign of the de-peg, but given that I didn’t, I maintain I made the right decision to sell this morning.

UST had ceased being a stablecoin.

It could still go up, & buying it at a discount is still a bet one can make, but it’s no longer a “mostly risk-free” stablecoin.

Getting out & saving almost half of my cash was the right decision, even if price tried to disprove that afterwards.

Reflections for the broader space

Lots of people lost much more money than I did.

A top 10 crypto token fell 99% in just a few days.

A supposed “safe space” to store your dollars & earn 20% interest failed on that promise big-time.

There are people who lost ALL their life savings, will foreclose on their house, & even worse.

The LUNA sub-reddit is a thread of national helpline numbers & sad stories of attempted suicide. I don’t doubt we’ll be hear stories about these times for years to come. If you are struggling and have lost money, whether in LUNA or the broad crypto market, DM me on Twitter. Let’s talk. National helpline numbers here as well.

Yes, we all are responsible for our decisions, do our own research, only invest what we can afford to lose, etc…

But to most people, holding UST didn’t feel like “investing”.

They saw a peg defended by $20B. Countless smart minds explaining the ecosystem, & a delightful product to use.

Many other algorithmic stablecoins that had de-pegged had recovered. The smartest people seemed to only have good things to say about the LUNA ecosystem (though could be communities tending to amplify one side over the other.)

The few concerns expressed weren’t much more than a muted “it’s a ponzi”.

Of course, everyone is fully responsible for their own decisions, but did everyone do everything within their power to voice concerns & prevent this from happening?

It’s easy to come out now & say how smart you were for avoiding UST (which many are doing), but where were these people 6 months, or even 2 weeks ago?

Yes, just as Anchor’s 20% APR & Terra’s rapid growth led us to overlook its fundamental flaws, so too (I think) its momentum intimidated many from expressing their reservations.

Maybe these people did try to warn everyone & no one was listening or sharing/amplifying it - it’s hard to know. But regardless, they were too little too late.

At the end of the day, the past week hurt all of crypto.

We’ll likely see new suffocating crypto regulation, & it will take a long time for stablecoins, crypto as a whole, & Terra (if ever) to regain trust in the community & the wider world.

I’m confident the whole space will recover (though no guarantees about individual projects, portfolios, coins) & come out stronger for the learning.

P.S. One reason the Terra/LUNA “ponzi” went on as long as it did was Terra founder Do Kwon. His absolute self-confidence & shit-posting made him seem unstoppable.

Without the mystery attacker draining UST’s liquidity from Curve, it’s easy to imagine Do Kwon’s personality enabling the UST/LUNA cycle for several more months, until Anchor’s interest reserves ran out.

Even after the de-pegging, Do Kwon only really became the villain when it was revealed this wasn’t his first failed stablecoin project.

What other key crypto figures could be a similar domino?

The only one that immediately comes to mind is Michael Saylor for Bitcoin. If he got liquidated or starting selling his Bitcoin, I think that’d be nearly equally as devastating for the market (& bitcoin). Luckily, I think that’s unlikely, but it can’t be overlooked.

What I’m doing next

I’m obviously down a lot of my cash, but I’ll be ok in the short-term. The most painful part is not having extra cash to deploy precisely when I most wish I could be deploying it.

As far as plays, I’m cutting my losses on mediocre conviction NFT & crypto plays. The next few months will be rough for all projects, & many won’t bounce back at all.

I’m keeping all my long-term plays (Fives, Vayner Sports Pass, ChainFaces Arena, etc) & building a list of other projects I’d love to grab for the long-term on any even bigger upcoming dips.

I’m looking at some coin plays that both cash-flow but also have room for appreciation (X2Y2, LOOKS, GMX, etc).

I’m trading & accumulating APE. Seems cheap at $5-6 & is more affordable exposure than buying Otherside deeds to whatever Yuga announces next for them. Most recent here.

And I’m not touching any stablecoins right now. My remaining cash is USD. I don’t feel like trying to get any yield out of it anywhere, we may see more stablecoin volatility, & I’d like to not stress about that part of my portfolio right now.

That’s all for today. Any questions/clarifications just reply!

—Luke