This was a week we’ll be talking about forever. Over the weekend, rumblings started that something was wrong in the Terra ecosystem. Billions of dollars of liquidity started moving out of the Anchor Protocol and the UST algorithmic stablecoin slightly lost its peg. At that point, the Luna Foundation Guard stepped in to tap its reserve to stabilize UST.
By Monday night, the UST peg had come undone entirely. Even as the LFG fought to restore the peg – deploying tens of thousands of BTC in the process – UST traded temporarily as low as $0.63. Tuesday morning brought some reprieve, with UST reclaiming $0.90. By that evening, however, things took a turn.
By Wednesday morning ET, the wheels had completely come off the wagon. UST was trading as low as $0.27 and LUNA went from a price in the low $80s at the end of last week to under $1 by Wednesday morning.
The crypto community was stunned. Crypto Twitter has been a morass of gutwrenching stories of loss, “I told you so’s”, and speculation about the implications of the crash – both for crypto funds and institutions, but also for regulations. US Treasury Secretary Janet Yellen made mention of the episode in testimony on the Hill as early as Wednesday.
There is still a lot we don’t know about what happened. Nexo has no exposure to LUNA/UST, and so the fallout for us is limited to our shared experience with everyone else in the crypto industry going through this momentous event.
While the temptation to point fingers and blame is high, this is likely an even more important moment to come together once again. The best business opportunities come in times like these so the show must go on with a community stronger than ever.
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Some NFT gossip. On Monday night, the founder of popular NFT project Azuki who goes by Zagabond revealed that he had previously been involved in CryptoPhunks, Tendies, and Cryptozunks – all of which were abandoned by their leaders. The floor price of Azukis crashed on the news and the collection saw a huge amount of volume the next day as make community members raced for the exits. Pretty rough week for anons, on top of everything else.
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Even without the UST implosion, this likely would have been a tough one in cryptoland. Traditional markets have also had a brutal run of it. On Monday, something new happened in which it was no longer just growth stocks down, but commodities and treasuries as well. The US Dollar was the only thing up. Many market participants are taking this to mean that the concern has shifted somewhat. While inflation remains elevated (the CPI print in the US came in at 8.3% year over year inflation), the bigger concern is the Fed’s anti-inflation policies causing a recession. Tech and crypto assets got hit the worse. Trading around $200 at the beginning of April, $COIN plunged to the $50s this week. Batten down the hatches friends – we’re in it!
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Is It a Good Time to Buy?
Of course, you shouldn’t listen to any financial advice anyone gives you but in this madness of a week the Nexo product machine continued full speed ahead. As a result, our clients in the US can now buy crypto with their bank cards in as little as seven seconds! Each purchase takes a few clicks and is equipped with instant crypto rewards as well as all the perks of the Nexo Exchange that you know and, we hope, love.
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This week in ventureland:
Nexo Ventures backed Coinmara, “Africa’s portal to the crypto economy” in their $23M raise, joining the likes of Alameda Research and Coinbase Ventures.
The Week’s Most Interesting Data Story
The Scale of the Pain
In this type of scenario, people naturally grasp to past examples to try and remind themselves that things do get better. People have been speculating all week about where the Terra situation ranks as a destructive moment in crypto history. Is it Mt. Gox? The Bitcoin Blocksize Wars? China Mining Ban? One common comparison has been Bitconnect. There are of course differences. Bitconnect was a scam from the beginning, whereas the Terra ecosystem has had a huge array of builders, entrepreneurs, VCs, and other believers. In some way, that makes the pain even worse. What there can be no doubt of is that the financial scale is incomparable. Our hearts go out to those suffering.
What the Community Is Discussing
Please, please let her be right.
There’s that silver lining.
Do anons count?
What to Watch for Next Week:
Nexo in Palm Beach for Permissionless
How will Terra impact crypto legislation?
Can traditional markets get out of their inflation-induced funk?