Burned By LUNA? You're Not Alone

OK, so LUNA crashed, UST crashed and some people have lost a lot of money. We are not saying that LUNA was a scam or rug pull; it had all the hallmarks of a legitimate project, however, anyone who has been in crypto for more than five minutes has seen many projects come and go very quickly. It is interesting to see how many professionals and institutions lost big money this time; this was not just a crash that hurt retail or amateur investors.

The importance of diversification

If you lost 2-5% of your crypto portfolio, then rest assured, that your other well-chosen and well-researched crypto investments will probably bounce back and you will be OK. If you lost more than this, that is unfortunate, but you are not alone. Many big names lost big fortunes on LUNA & UST. The lesson is, as always, the importance of diversification.

The world’s first diversified crypto fund, Bostoncoin only had 2% exposure to LUNA, whilst competitor Apollo Capital had around 20% exposure to LUNA & UST.

Galaxy Digital and Pantera Capital were two of the largest firms to back Terra, with both contributing to a $25 million funding round in January 2021. Both of these companies also contributed to the second funding round, alongside BlockTower Capital and Delphi Digital.

You may have seen Galaxy Digital CEO Mike Novagratz (Mike “No Regrets”?) getting a LUNA tattoo when LUNA hit $100 -- now that tattoo is going to be doubly painful.

Galaxy'spress release states they lost around $300M, and their stock fell 31% on the news.

Arca hasn’t disclosed how much it lost on its Terra bet, but they stated that Terra ecosystem tokens were a “core holding” in its Digital Assets Fund. That could be anything from 20% up to 50%.

Whilst Galaxy, Pantera, Three Arrows Capital, and Arca are some of Terra’s more prominent backers, they only represent a small portion of firms that had exposure to Terra. Binance Labs, Coinbase Ventures, Blockchain.com, and Huobi, also invested in Terra. Binance apparently invested around $3M

We have heard around the traps that some individual investors may have lost up to $19M; funds that they thought were “secure”, as they had invested into a so-called “stablecoin”.

The advice is unchanged: Diversify. Do not pull all your “safe” funds into one single stablecoin. UST was not “too big to fail”, nor were the huge US banks, Lehman Brothers and Bear Sterns.

If you have significant funds, use multiple bank accounts with multiple banks and spread your risk. Consider using international stablecoins, as a drop in the USD or Euro could have a positive effect on other currencies. You can find digital versions of the CAD, HKD, AUD and many others.

Stay safe out there. Diversify and do your own research; especially as this time, many of the big-name investment houses were wrong. If you have been personally affected by the LUNA/UST crash and are feeling awful, talk to a professional financial adviser, counsellor or grief therapist. Crypto markets can hand out fortunes and they can swiftly take those fortunes away. Stay strong, stay alive and do not let them take your life or happiness.

JB