Mike Novogratz, the billionaire CEO of crypto investment firm Galaxy Digital, recently gave his thoughts on the current crisis in the Terra blockchain ecosystem.
This crisis has resulted in market collapses for both the LUNA token and the algorithmic stablecoin UST – Novogratz’s commented
The shareholder letter that Novogratz sent out came only a few days after Galaxy updated investors on its current financial status. Galaxy was an early supporter of Terraform Labs, the company that developed the Terra blockchain.
Not A Good News For Crypto
“Our major investments team invested in Luna in the fourth quarter of 2020,” Novogratz said, adding that Galaxy was drawn to invest in Luna owing to the company’s specialization on payments. In January 2021, it was disclosed that Galaxy took part in a fundraising round for $25 million.
Novogratz made the observation that what took occurred in the markets or with the ecosystem of Terra is not good news.
Mike Novogratz argued that the market event that occurred last week took place in a “brutal” macroeconomic climate.
“The combined market capitalization of Luna and UST dropped by $40 billion in the span of only a few short hours. All investors, no matter how large or little, saw their profits and riches evaporate. The collapse completely destroyed people’s faith in crypto and DeFi. People want explanations whenever there is a significant financial loss of any kind.”
“This macro context contributed to the burden that was put on Luna as well as the reserves that were retained to support UST. The 18 percent return that was provided in the Anchor protocol had contributed to the expansion of UST’s development, which ultimately led to it surpassing other applications of Terra blot.”
UST Reserves Were Not Enough
He wrote, A “run on the bank” stress scenario was created as a result of the combination of downward pressure on reserve assets and withdrawals from the UST. The reserves were not enough to keep UST viable in its current state. In hindsight, things almost always seem to make more sense.”
- Will $BOME Follow $WIF and Hit $1. Should you Buy $BOME ?
- Solana to hit New All Time Highs Sooner than you think as Altseason Gears Up.
- If You are Still Sidelined In Crypto. Buy This Crypto for A 10X – 20X Gain.
- Do not Buy Ripple (XRP) Rather invest in these Crypto for Bigger Gains
- JUST IN : Gary Gensler Realises He Can’t Stop Crypto.
