Mike Novogratz, a billionaire crypto investor and proponent of cryptocurrency published an article on May 18 about Terra’s recent fallout. Novogratz, his company Galaxy Digital and the Terra project were huge believers. The investor got a LUNA 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. Mike Novogratz (billionaire crypto-proponent) was one of the many investors we mentioned in our report. Novogratz, along with Galaxy Digital, were staunch believers in Terra’s ecosystem for a long time. 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 has also been awarded 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 tweetedFor the first time since May 8, 20,22. “After much thought, it’s time to talk about last week and, more importantly, the weeks ahead,” Novogratz said. Novogratz also left a link in the tweet to a blog article that provides detailed information about the Terra disaster.
“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. Profits and wealth disappeared for both small and large investors. This collapse shook confidence in crypto. [decentralized finance]. When money is suddenly lost, people seek 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 stated that the LUNA/UST incidents have brought to light some fundamental principles of investing, including diversification, profit taking, risk management and understanding how investing works within a macro framework. These core tenets were maintained by Galaxy Digital, according to the billionaire investor.
“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.
How do you feel about Mike Novogratz’s reflection blog posting about Terra’s belief and the LUNA/UST scandals that happened this week? Please comment below to let us know your thoughts on this topic.
Credits for the imageShutterstock. Pixabay. Wiki Commons
DisclaimerThis article serves informational purposes. It does not constitute an offer, solicitation, or recommendation of any company, products or services. Bitcoin.com doesn’t offer investment, tax or legal advice. The author and the company are not responsible for any loss or damage caused by the content or use of any goods, services, or information mentioned in the article.