Delphi Digital scratched by the Terra Luna disaster

Delphi Digital scratched by the Terra Luna disaster

Calculations totally to be reviewed – The Earthquake Terra (LUNA) continues to claim casualties and put some well-known crypto players, like Delphi Digital, embarrassed. The company had to explain its decision to support, in the past, a crypto project which turned out to be a fiasco.

Delphi Digital and Terra: 10 million dollars in the abyss

In its May 18, 2022 blog post, Delphi Digital called the collapse of the stablecoin UST and LUNA the“most catastrophic event to happen to cryptos since Mt. Gox”.

The company wants “be transparent” concerning I’“involvement in Terra” of its various divisions. She tried to justify your investments in LUNA, while admitting his mistake.

As a reminder, the Delphi Ventures Master Fund had purchased a small amount of LUNA in the first quarter of 2021. It subsequently increased its exposure to cryptocurrency as its price rose.

In addition, Delphi Ventures participated in the amount of $10 millionto the Luna Foundation Guard fundraiser in February 2022. Delphi Digital clarified that this investment “is completely lost”.

Society would now be sitting on “a significant unrealized loss”. This loss will be linked to the collapse of the LUNA in his possession. She wouldn’t have gotten rid of it, despite the crash.

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Collapse of Terra: unthinkable, although possible

Did this collapse of the Terra ecosystem tokens surprise Delphi Digital? The company indicated in the post that it had “always knew such a thing was possible”.

She defends herself by adding that Delphi Digital has “tried to point out the risks of such a system” in his research and public observations.

Delphi Digital would, however, “miscalculated the risk of a ‘death spiral’ type event occurring”.

The company estimated that the reserves of bitcoin (BTC) operated by the Luna Foundation Guard would prevent such a scenario. The fall in the price of bitcoin during this quarter of 2022 has apparently made possible the unthinkable.

“We believed that a high level of external collateralization was a long-term necessity, and we saw this as a way to achieve this. Unfortunately, the growth was not fast enough relative to the supply of UST and, combined with the falling value of BTC reserves, the excess liabilities were too large to cover. »

Delphi Digital Blog Post

Delphi tried to end her post in a reassuring tone:

“Fortunately, Delphi is entirely self-funded and when we make high conviction bets like this, our own capital is at stake.”

The company also concluded by making its my culpa concerning his error on the risks associated with Terra’s algorithmic model:

“To the scathing criticism of Terra’s algorithmic design, you were right and we were wrong.”

The cryptosphere experienced shocks before the collapse of UST and LUNA, and it will experience more. Unfortunately, the debacle of Terra gives its detractors an additional reason to tap on cryptocurrencies.

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