Original Author: A&T Capital

What do you think of the LUNA crash, was it inevitable?

@Jun_Yu:

The Luna project was the first to vote for OK. I was in charge of investment in OK in 2018. I met with the Luna team three times, twice in Seoul and once in New York. At that time, we learned that they had a lot of resources in South Korea, and many large financial groups participated in it. At that time, another partner of Luna, Daniel, was a little older. At first, he wanted to do digital payment, and he didn't think of the concept of stable currency at all. Later, it may be because of market inspiration that I started to make stable coins.

I myself was not optimistic about their offline payment at the beginning, it was like re-doing China's Alipay in Korea or even in the world. I thought it was quite difficult at the time, so in fact I didn’t want to invest in it at the beginning and passed the project, but at that time there was a girl in our investment team who liked it very much, and in the end OK still voted, which also became the highest return multiple in the history of OK’s investment of a project.

The principle of Luna’s stable currency is like stepping on the right foot with the left foot. We should think about where the money we earn comes from and whether it is someone else’s principal. If you don’t know whose money you earn, then your principal It is other people's money. This is a simple truth, it is a herd effect, especially after the bull market last year, people may think less about these issues.

So I think the collapse of LUNA is inevitable in a certain sense. Many people also think that Luna is a hidden danger, and it is likely to explode. Just like Murphy's law, if many people think that something is likely to happen, then it will happen sooner or later. occur. Well, this thing happened today, and we can be regarded as witnessing history.

The development of crypto to the current stage has been noticed by the mainstream financial Wall Street and participated in it, but many people in this industry are too high-profile and arrogant, and even forget some of the most basic laws of the jungle in the financial field. The face of the card is completely exposed on the table, waiting to be exploded. A very important thing in the financial field is not to let others know your cards. Knowing the hole cards is too easy to be attacked. Although everyone says that luna is bound to Bitcoin, such a thing will not happen. When Citidal comes in, they don't care whether the money is retail or not. As long as he opens a good empty order, he will go to fixed-point blasting. Do Kwon's actions were like carrying a pack of explosives to the square, saying that I will die with you, and whoever dares to attack me, Citidal doesn't care how many people you kill, it will attack on the surface.

Another point is that everyone should pay attention to how their money is earned, why there is such a high income, or ask one more question, where does your income come from?

@JinzeJIang0x0：

The speed of Luna's additional issuance is too fast. It took 2 years to build the foundation of the ecology. After the ecology was good, it quickly went from 100 million US dollars to 20 billion after the anchor came out. It was too fast to cast UST, but through selling Has the price of LUNA casting been lowered? The risk accumulated through oracle casting has accumulated a lot of debt on the one hand, and on the other hand, the price of the assets cast should rise theoretically. Excessive casting and oracle casting have led to the accumulation of risks. It is not surprising that this situation occurs when the market is not good.

Just now LUNA made a foolish move. He made an announcement. I think it will be very difficult to make a comeback. The announcement said that the recasting of UST to LUNA will be relaxed. UST can be run away through the back casting of LUNA. On the surface, it is to give confidence to UST holders, but the depth of LUNA is too shallow to hold the 16 billion stock of UST. The total market value of LUNA's circulation may be less than 1 billion, which makes the market value of LUNA shrink even more, resulting in a rapid increase in the ratio of UST/LUNA, and it is basically impossible to come back. A better measure would have been to use shock therapy to cut off the recasting channel and stabilize the market value of LUNA. Although UST cannot be stabilized, everyone is still confident that LUNA will come back in the future. Now the market value of LUNA must plummet.

@Jun_Yu：

To comment on what Kanazawa said just now, I personally feel that LUNA has been powerless since last night. I even wonder why it took me a whole day from 40 yesterday to now. I think especially during the 2008 subprime mortgage crisis, it took only a few minutes, almost an instant, for Lehman Brothers to go from a market value of tens of billions to zero. In a mature capital market, everyone can quickly understand that it is a rhythm of returning to zero and everyone is stepping on it. The most rational choice for a person is to flee. Maybe there are too many retail investors in the crypto circle, and they still hold some simple concepts. Even today, some people say that they want to buy bottoms. Isn’t this going to pick up corpses from the dead. I think it can actually be faster and return to zero directly.

@bitouq：

The whole process of LUNA's collapse was done in one go, and the run was completed through the escape of anchor funds, which is likely to be a snipe. For the whole industry, the risks are underestimated. DK said that one possibility is to release LUNA to protect UST. There are many reasons for protecting UST. It is true to assume that UST is to be saved. The reason to save UST is because UST is the foundation of ecology, and all projects are priced through UST. The collapse of UST is equivalent to the country's exchange rate imbalance. All assets of the country cannot be priced with foreign exchange rates, but can only be priced with their own country's currency. The protection of UST is to protect the projects in the ecology, not to protect the interests of users. for project support. To save LUNA and protect community users, UST may not be able to go back, and may still face legal risks. There is no way to save UST. In order to allow the ecology to continue to turn.

@JinzeJiang0x0：

I think it may be because there is still a lot of liquidity on the chain, it will not be withdrawn immediately, and it can last for a while.

@Jun_Yu：

These practices of the Terra Foundation are stupid tricks. The first is that he exposed his own financial situation; the second is that he panicked at the beginning and fired all his bullets, and then he was just a mermaid.

What's next for the stable track? Is there another chance?

@nake13：

I think this question has been answered now, and it is difficult to develop an algorithmic stablecoin without reserve; it was interesting when I first saw these concepts in 2018, but looking at it now, it uses some mechanisms to solve the problem of circulation, But when you actually put it into practice, you will find that it is very unstable against very Ponzi.

@Jun_Yu：

I also think that if Luna does not have a reserve behind it, it is still difficult to make people feel at ease; if there is no reserve, it will only collapse sooner or later. Including USDT, which is more popular today, of course, he still has reserves of USDT, but it may not be transparent; and it has also gone through a lot of historical precipitation. If you really want to use 1:1, USDC is currently the best. At the same time, these stablecoins must also consider regulatory issues. If they are all US dollar stablecoins, US supervision is also a factor that cannot be ignored. The best advantage of USDT now is to make everyone believe that it is a stable currency, and they are used to using it for denomination. For those algorithmic stable coins, no matter how good the mechanism is to a certain extent, they will not go back, more like a financial derivative.

@nake13：

We have seen that the development of stablecoins in 2020 is gradually changing from unsecured to secured; including defi2.0 is also the trend. I personally still like algorithmic stablecoins, including those who do not necessarily target US dollars. In fact, everyone’s needs are not One dollar, but a product with relatively stable purchasing power.

@Jun_Yu：

In fact, BTC and ETH are also stable currencies in the eyes of some people, and their volatility may become smaller and smaller in the future.

@bitouq：

Yes, I have paid attention to some ETH-based stable currency products; but their scale is actually very small, and the current hot spot is not here.

@JinzeJiang0x0：

I think USDT’s point of view is actually very good. We have also discussed the issue of transparency and opacity before. Too much transparency is actually not conducive to the circulation and transaction of products. And these products on Curve have this kind of information unequal. The price comparison of tokens in different pools does not directly affect the outside price. If the price is completely transparent, there should be a discount, but in fact, everyone has not carried out rigorous pricing. , but based on trust and consensus. For example, BUSD is actually more like a company’s debt, and there should be a discount, but everyone thinks it should be 1. Even for UST, if it develops slowly, there will be opportunities for discrimination, but the recent strategy is too radical, which led to the collapse of its ecology.

How do you view Terra’s official handling of this crisis?

@forgivenever：

I think this round of crash was sniped by Wall Street's OG; they looked down on them a few years ago, but now they think the entry cost is too high, so they got low-cost chips through a snipe. They first used institutions such as DCG to fool terra, and bought BTC at a high price of 40k+. After terra built a position, they started to do it. Originally, Ponzi like terra had no problem with entering and exiting during the bull market, but now this kind of bear market still has certain risks; because of this, they need to try to build a 4pool in the curve to resist risks, but in this Their mobility is affected during the attack.

Afterwards, Wall Street borrowed nearly 3-4b of BTC and began to smash the market, causing panic. Many celebrities and capital began to flee from the anchor; Further exacerbated the market panic and further catalyzed the flight of large households. A death spiral has gradually formed here. At the same time, the income of anchor may be expected in the bull market, but now it has formed a rigid exchange, which further strengthens this positive feedback.

At the same time, I think DK’s rescue plan this time is very poor. The act of saving UST by giving up luna is to give money to those arbitrage users, while users who have always supported luna and terra have borne the cost.

@JinzeJiang0x0：

In fact, he should not let the market arbitrage, he should close the casting channel, or fill up the quota every day to make money by himself, so that the money is still in the foundation.

@forgivenever：

The correct solution is to directly burn 95% of UST after airdropping by holders.

@Jun_Yu：

Luna will eventually become the fertilizer of the industry and remain in the industry to become the nutrient for the next wave of bull market. What will happen to the industry in the next period of time? How affected were you by this event? What will be the specific performance?

@forgivenever：

The Cosmos ecology is basically half abandoned, because ust invades too much in the Cosmos ecology. If the Luna ecology does not regain confidence, it will basically be abolished if the panic is not resolved. Many exchanges that received orders on ust also lost money, the most serious ones are Binance and kucoin, because these two are supported by ust in the early stage and have a large amount of support, while others support it later and not so much. The market structure has changed, and then Wall Street will enter the market more quickly. The first step of crypto capitalism is the entry of VCs from Silicon Valley, such as a16z, but when quantitative funds enter, the game will be more linked with traditional markets. In the future, the correlation between the currency circle and the traditional market will increase. Now, whether many public chains are good or not depends not on their technology and paradigm, but on whether the Wall Street capital or Silicon Valley capital behind them is good, and the voice of shouting orders on twitter No, it's actually quite sad. Because the original intention of our industry is to advocate the iteration and innovation of decentralization and technological paradigms, rather than the crazy development of solana capital like now. So the current situation is even more miserable for Chinese entrepreneurs. Wall Street enters the market, and ponzi is full of loopholes, but ponzi itself is a very important means of web3 development.

Will the next decentralized stablecoin end differently?

@forgivenever：

This is not a question of slow and fast. Its development requires thinking about its path or its applicable scenarios. For example, if you post a message today and follow stepn users, that is actually very good, because stepn users have more than 600,000 people, which is very scattered. It is safe to say that if the development speed is very fast, and the circulation is also large, then the boundary difference is actually very small. If the holders are all giant whales, and the giant whales can exchange for a large amount of liquidity, it is a game between big players and big players, and retail investors can only be forced to protect themselves. Therefore, the holders should be sufficiently dispersed and the information asymmetry should be high enough, rather than relying on the development of large investors. Relying on large households develops quickly and destroys quickly.

What systemic impact would the Luna crash have on the industry as a whole?

@Jun_Yu：

I don't know the penetration rate of luna ecological assets in the crypto industry, but I generally feel that the impact of subprime loans in the 2008 financial crisis should be smaller. In the short term, there will be a blow to everyone's confidence, and other projects with similar model extensions will have an impact. But just now Mr. Yuan mentioned that the entry of mainstream Wall Street institutions is a challenge to the crupto natives on the one hand, and whether it will be a good thing to the crytpo industry on the other hand. He will have some thoughts on the valuation methods of the entire industry and return to rationality , more support for some projects that can deliver things to the ground. Since a well-known project in the market attracted more and more attention more than a month ago, I have been pouring cold water on it. Don’t just look at the high rate of return, and at the same time pack an X-to-earn coat to tell a big story. Just ask where the income comes from. There is no perpetual motion machine in the market, and these projects need to be questioned. But it does not mean denying web3. Ponzi is a neutral term. The early ecological construction at the beginning requires some overdraft in the future, but the important thing is whether this account can be made up in the future. A large part of the reason for Luna's collapse was that he owed too much and couldn't make up for it.

@JinzeJiang0x0：

I think this time is really similar to the 2008 financial crisis. Financial companies frantically printed money in a disguised form to lend money, and then absorbed a bunch of toxic assets. But one advantage is that a lot of its liquidity is sunk on the chain, and it will clear the risk in an instant. For a project, the project may die, but for the waves brought about by this project, these risks will be cleared quickly in the liquidity on the chain. So it will not have a long aftermath like the financial crisis in the traditional world. So I have always felt that adding leverage to DeFi is actually not as scary as adding leverage in the traditional world, because although its high volatility is not very good, but on the other hand, its risks are quickly cleared, and everyone can start from scratch.

@Jun_Yu：

It was as if a pustule had been pricked, exposing the risk.

@bitouq：

Stablecoins like UST, whose market capitalization is the top few, surpassing DAI and BUSD, are unanchored, which will definitely have a great impact on unsecured stablecoins of the same type in the market in the future, and market confidence will also be greatly affected . But in the end, everyone definitely hopes to have a decentralized stable currency that can be used as a safe-haven asset, but this requires a process of development

Reflecting on the Luna crash, how do users set up risk isolation when managing assets?

@bitouq：

The current Defi blue chips have an investment cycle, and the quality of the product is an investment basis, but we must also pay attention to the timing of entering the market. For example, Luna has risen a lot last year. In fact, the rising speed is too fast, and the bubble is actually very big. At present, there are still very few Defi products that can break away from Ponzi, and most of the profitable products are still Ponzi, so we must pay attention to the investment cycle and do not blindly chase high.