On May 18, the billionaire investor and crypto proponent Mike Novogratz published a post about the recent Terra blockchain fallout. Novogratz and his firm Galaxy Digital were big believers in the Terra project, and the investor even got a LUNA-centric tattoo on his arm. Despite the recent events and losses, the crypto economy felt this past week, Novogratz stressed that he still firmly believes the “crypto revolution is here to stay.”
Novogratz Reflects on Terra’s Demise: ‘It’s Time to Talk About Last Week’
Just recently, Bitcoin.com News reported LUNA and UST’s implosion and the big name backers that invested in Terraform Labs. One of the investors mentioned in our report was the billionaire investor and crypto proponent Mike Novogratz. For quite some time, Novogratz and his firm Galaxy Digital were big believers in the Terra ecosystem. On January 26, 2021, Bloomberg quoted Novogratz and the investor called the Terra blockchain project one of “the canaries in the coal mines of what else is going to happen.”
Novogratz also got a LUNA-themed tattoo and said he was “officially a Lunatic.” After the UST de-pegging incident and the entire Terra ecosystem getting obliterated, Novogratz was not as talkative as he usually is on Twitter. On Wednesday, May 18, Novogratz tweeted for the first time since May 8, 2022. “After much thought, it’s time to talk about last week and, more importantly, the weeks ahead,” Novogratz said. In addition to the tweet, Novogratz left a link to a blog post that discusses the Terra fiasco in detail.
“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.”
Novogratz then got into Galaxy’s principal investments in LUNA starting in Q4 2020, and how the team noticed that the project had “more than 1.8m users and was a top 5 finance app in South Korea that we considered had significant growth potential.” Galaxy was “intrigued” by the Terra ecosystem, and thought of it as “an example of crypto finding a real-world use case.” Then the investor noted that the global macro backdrop did a number on many risk assets this year, and he believes the “macro backdrop put pressure on Luna and the reserves held to back UST.” Novogratz added:
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.
Novogratz Highlights the ‘Core Tenets of Investing’ — Galaxy Founder Says ‘It’s Important That Less Experienced Market Participants Only Risk What They Are Comfortable Losing’
Novogratz said that the LUNA and UST incident shined a light on some core tenets of investing which include diversification, taking profits along the way, risk management, and an understanding of investing under a macro framework. The billionaire investor said that Galaxy Digital kept to these core tenets when it came to its investments in LUNA.
“Reading the stories of retail investors who lost their savings in one investment is heart- wrenching,” Novogratz’s blog post explains. “A core tenet in the crypto belief system is equal access to markets. But it’s important that less experienced market participants only risk what they are comfortable losing. I’ve often said people should allocate 1%-5% of their assets to the space.”
The Galaxy Digital founder concluded by noting that he’s still a firm believer in the crypto space but that does not mean the bottom is in and the market will be going straight up after this. “It will take restructuring, a redemption cycle, consolidation, and renewed confidence in crypto. Crypto moves in cycles, and we just witnessed a big one,” Novogratz added.
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addressing Terra, Bank Run, Billionaire Investor, Blog Post, decentralized finance, DeFi, Galaxy Digital, Galaxy Digital CEO, Galaxy Digital founder, LUNA, LUNA Tattoo, Mike Novogratz, Novogratz LUNA, Novogratz Terra, Novogratz UST, Q4 2020, stress scenario, Terra Blockchain, Terra reflections, UST
What do you think about the reflection blog post Mike Novogratz wrote about his belief in Terra and the LUNA and UST fiasco that took place this past week? Let us know what you think about this subject in the comments section below.
Jamie Redman