Terra UST and . flash crash Luna According to Michael Novogratz, founder of the crypto merchant bank Galaxy Inc., the crypto in particular reinforces some of the fundamentals of investing in the market.
In a letter dated May 18 to shareholders, friends, partners and the crypto community, Novogratz acknowledged that Terra UST and Luna were “a big idea that failed.”
Novogratz said, “There is no good news in what happened in the markets or in the Terra ecosystem. In Luna and UST alone, $40 billion of market value was destroyed in a very short period of time. Investors both large and small made gains. And the money looked. disappeared. The collapse eroded trust in crypto and DeFi.”
“Whenever money is lost in such a sudden manner, people want answers,” he said.
To begin with, the global macro backdrop has been brutal for all risk assets this year, Novogratz points out. Growth stocks with negative cash flows are down 50-70% this year. The cryptocurrency has been under pressure from core assets such as BTC and ETH, which are each down nearly 58% from all-time highs and an average of 80% below all-time highs.
In addition, Novogratz talked about the global background. He said central banks are in the early stages of opening a massive liquidity bubble – fueled by unprecedented fiscal and monetary policy injections into economics around the world, including in the US – that had propelled all riskier assets.
He said the ethos of ‘free money forever’ of the last decade has left us facing the biggest battle of inflation since the 70s. There was a meteoric rise in many properties during this period as COVID faced meaningful and correlated reforms.
According to Novogratz, this macro backdrop put pressure on Luna and the reserve came back to UST.
“The growth of UST was exploded by the 18% yield offered in the Anchor protocol, which eventually overwhelmed other uses of the Terra blockchain. The downward pressure on reserve assets with UST withdrawals created a similarity to ‘walking on the bank. The tensions led to the scenario. The reserves were not enough to prevent the collapse of the UST,” he explained.
Next, the founder of Galaxy highlighted four main principles of investing in crypto following the sudden crash of LUNA/UST. This:
– Have a diversified portfolio,
– Take profits along the way.
– have a risk management framework, and
Understand that all investments are made in a macro framework.
“Galaxy did it all in connection with our investment in LUNA,” said the founder.
Talking about the future of crypto, Novogratz said, “Crypto is not going away. The amount of human capital going into space is not slowing down. The focus is on building decentralized infrastructure that brings value and ownership. Allows information to follow as freely as possible. The Internet is not slowing down. The GDP of the metaverse is rising one way or the other. Our community is resilient, there is a shared belief in a new way of doing things, and reassurance It’s a very early innings.”
He also said that this does not mean that the crypto market will be down and will directly back up. It will take restructuring, a redemption cycle, consolidation and renewed faith in crypto. “Cryptocurrencies move in cycles, and we just saw a big one,” he said.
According to CoinMarketCap’s real-time performance, the global crypto market cap stands at $1.31 trillion, up 1.58% over the previous day. Furthermore, the cryptocurrency volume increased to $67.63 billion in the last 24 hours, registering an increase of 17.78%.
Meanwhile, the total volume of DeFi is currently at $8.40 billion, representing 12.41% of the total volume of the crypto market in 24 hours. The volume of all stablecoins is now $58.81 billion, which is 86.96% of the total 24-hour volume of the crypto market.
Bitcoin was up over 1% near $30,421.54. Bitcoin dominance is currently at 44.29%, down 0.27% on the day. The Ether equivalent was trading at $2,069.08, up 2%.
In the past seven days, both BTC and ETH have recovered from the crash of the first two weeks of May and are up over 2%.
Terra UST also climbed about 13% and traded around 6 cents. However, Terra Luna is down more than 12% and is currently at around $0.0001819.
Terra UST lost its peg and has struggled ever since. Its weekly decline is now around 50%. LUNA has dived 100% from its all-time high of April.