• Wed. Jun 22nd, 2022

Cryptocurrencies: Dreams shattered by Luna, the cryptocurrency that crashed in three days: ‘It seemed like a safe bet’ | Economy and business

ByHazel R. Lang

May 17, 2022
Do Kwon, the founder of Terraform Labs, the creator of Luna.Woohae Cho (Bloomberg)

Until a few days ago, DS thought investing in cryptocurrencies was one of the best decisions of his life. He had €80,000 ($84,300) in Luna, double the €40,000 ($42,200) he invested nearly a year ago. Today, when he opens the app to see how much he has left, the vision is bleak: €4 ($4.22). “It seemed like one of the safest bets. Even when bitcoin was losing value, Luna was reaching all-time highs. They were going to launch lots of projects and they were backed by investment funds,” says the 32-year-old Spaniard, who saw most of his savings evaporate in just three days after the digital currency collapsed. .

His story is repeated around the world. Luna was created by Terraform Labs, which is owned by 30-year-old Do Kwon from South Korea. Until a few days ago, it was considered one of the greatest success stories in the sector. Last week, before the collapse, a young Luna investor described Kwon as a “visionary, the Elon Musk of the future”. Tens of thousands of retail investors around the world have poured their money into Luna, which was once valued at $18 billion. But opinions on Kwon have changed now that investors are coming to terms with their losses. On forums such as Reddit, once-enthusiastic backers are sympathizing with their losses, with some users expressing suicidal thoughts. And now Kwon fears for his safety. After Luna’s accident, a stranger broke into the premises of Kwon’s apartment, rang the doorbell and asked his wife if her husband was home before fleeing the scene. Kwon’s wife reportedly asked for police protection.

It’s the disturbing end to a period of unbridled euphoria. When Luna’s value jumped from $4 in February 2021 to $60 in the same month of 2022 — a fifteen-fold increase in just one year — questions weren’t raised about the sudden rise, but it was expected. until it increases even more. Few people suspected that everything was on the verge of collapse. “I invested because it was one of the main cryptocurrencies. It was in the top 10 by market capitalization. I was sold on the project and the profitability of his stablecoin was amazing,” says another young Madrid man under 30, who lost €5,000 ($5,300).

The stablecoin it refers to is TerraUSD or UST. Investors who deposited UST in “Anchor Protocol,” a lending and borrowing protocol designed by Terraform Labs, were offered a stable rate of return of up to 19%. In a context where few banks give more than 0% due to low rates, this anomaly was not challenged by winning investors, blinded by the power of a new technology that promised to enrich them. But the UST lost its peg to the US dollar, and that’s what sent Luna, its sister currency, into a spiral of health. Luna lost over 90% of its value in three days, triggering one of the biggest shocks in the crypto industry’s short history. But big losses don’t always have a deterrent effect. “I always think it can turn around and I haven’t sold anything. On the contrary, I’ve bought more. When a guy goes out to party and spends 50€ [$53] on drinks about something affecting his health, no one asks him if he thinks it’s wrong to throw that money away. At least it doesn’t hurt my body,” says the 30-year-old from Madrid.

Disappointment

Other Luna Investors have completely given up hope of a comeback, which experts have also ruled out. An investor, a 41-year-old doctor who, like the rest of those affected by the crash, speaks only on condition of anonymity, says he will now limit his cryptocurrency investments to the two most important: bitcoin and Ethereum. . “I lost two months of salary, around €8,000 [$8,500]so it didn’t change anything for me. My investments are diversified and the percentage I have in cryptocurrencies is very low, but I think this is a blow to future crypto adoption that is so much talked about. For the time being, I will stay on the sidelines and only reinvest the profits,” he said in a message on Telegram, which has several groups of Luna investors.

Yuvraj Sharma from India is one of the few people to have agreed to give his full name. His friends and family are unlikely to read the news, and the $200 he lost to Luna hasn’t turned his life upside down either. But for the 19-year-old business student from Calcutta, it’s more money than meets the eye. “It’s a lot for me because it cost me a lot of effort to get it. It’s two months salary. I still hope that something will be done to deal with this devastating crash and that I can at least get out with what I invested,” he says. The odds of that happening are close to zero. Luna’s price today is $0.0002.

Sharma’s case highlights a growing trend: more and more young people are investing in cryptocurrencies, without any safety net. The fact that they do not have large sums to invest is the only thing that prevents them from losing larger sums of money in an area that they do not fully understand. The question now is whether these young investors will persevere and invest more when they start earning more, or if this is just a passing trend that will fade over time.


Source link