On Twitter, messages from investors ruined by the stablecoin TerraUSD and its “sister” cryptocurrency Luna number in the thousands. Among them, there are also big names in the industry: billionaire Mike Novogratz paid the price, but one of the biggest losers is none other than the Binance cryptocurrency exchange platform.
Back to the facts
In 2021, the Luna token experienced an exceptional rise with more than 3,000% growth… before suddenly collapsing and almost disappearing about ten days ago. The promise of an algorithmic stablecoin coupled with an alternative blockchain to Ethereum had nevertheless won over the general public, including the greatest visionaries in the sector.
The descent into hell was dizzying: 40 billion dollars evaporated in a few days. The Terra USD was attacked and failed to maintain its parity against the dollar. The algorithms that arbitrated on the Luna cryptocurrency to maintain parity then led in their wake to a sharp drop in the Luna token which, in the space of a few days, lost almost 100% of its value.
If Mike Novogratz and his company Galaxy Digital started to believe in it in 2020, Binance was one of the first players to bet on the Luna ecosystem. Transparently, the platform’s founder, CZ, indicated that Binance had made an investment of $3 million in 2018 to support the project.
In return for this capital contribution, Binance received 15.4 million Luna on a portfolio “that has never moved”. Part of these funds were staked, which allowed the platform to receive 12 million TerraUSD (UST) as bonuses in July 2021. A spokesperson for the company also claims that Binance has never invested live in the TerraUSD.
2/ Binance received 15,000,000 LUNA (at peak worth $1.6 billion USD, now not much) as part of the original ($3m) invest. 560x return at peak. It still sits on the address we received at 👇. Never moved or sold.
— CZ 🔶 Binance (@cz_binance) May 16, 2022
$1.6 billion in Luna
In a tweet, Changpeng Zhao laconically returned to this failure. At the top, those 15.4 million Lunas were worth over $1.6 billion. In the space of 4 years, the firm would therefore have multiplied its capital by 560.
Today, when the Luna is only worth $0.0001079, his investment is only worth $1,600. Zhao strongly criticized Terra founder Do Kwon’s recent decisions on social media: “I am very disappointed with how the UST/LUNA incident was handled (or not) by the Terra team”. If he drew a line on his profits, he urged the team to find a solution to reimburse small investors.
The moral of the story can be found in Mike Novogratz’s apology letter to his shareholders: 1) keep a diversified portfolio, 2) secure profits throughout, 3) put in place a risk management model and 4) understand that all investments are linked to a macro-economic context.