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TERRA’S TACTIC: Terra validators temporarily pulled the plug on their network for a second time at about 10 p.m. ET Thursday following a technical glitch caused by an influx of LUNA tokens meant to restore the value of the dollar-denominated stablecoin UST, which is well off its dollar peg. The decision shows the extreme lengths Terra founders are willing to go to rescue the network, including inflating away the wealth of current LUNA token holders (LUNA traded above $90 last week, and is now worth less than a cent). - Terraform Labs founder Do Kwon, in a forum post submitted 30 minutes ago, proposed a “Terra Ecosystem Revival Plan" that would redistribute network ownership entirely to UST and LUNA holders through 1 billion newly minted tokens.
- In Friday’s proposal, Kwon conceded that the Terra ecosystem has experienced total collapse.
- Network validation was later rebooted, though it is unclear if all transactions made during the offline period would be settled. Terra encouraged users to “bridge off-chain assets, such as bETH, to their native tokens,” as on-chain swaps and Inter-Blockchain Communication (IBS) were halted.
- Crypto exchanges Binance and OKX have delisted Terra’s LUNA and UST tokens, citing significant risks and consumer protection. In a tweet, Binance CEO Changpeng Zhao strongly criticized Kwon's leadership this week, or lack thereof.
- FTX and Gate.io, among others, have continued to support LUNA and UST trading.
FOUNDER VENTURES: Sam Bankman-Fried, CEO of crypto exchange FTX, took a $482 million position in Robinhood Markets (HOOD) on May 2, according to a Securities and Exchange Commission filing. Executed through an Antiguan firm called Emergent Fidelity Technologies Ltd., the position represents a 7.6% stake in the popular trading app. Shares of HOOD rallied 28% in after-market trading. - David Marcus, the former crypto chief at Facebook parent Meta Platforms, has started a new company that will build on Bitcoin’s Lightning Network, called Lightspark. It is backed by an undisclosed funding round that was co-led by Andreessen Horowitz (a16z) and Paradigm.
DOWN BAD: The $18.3 billion Grayscale Bitcoin Trust (GBTC), the world's largest bitcoin fund, has seen its market discount widen to an all-time low of 30.79% this week as crypto markets suffered one of their most volatile weeks in recent times, data shows. Each share of GTBC holds $26.46 worth of bitcoin as of Friday, according to Grayscale. CRYPTO AT SCALE: According to Ashley Alder, chairman of the International Organization of Securities and Commissions (IOSCO), a joint body responsible for coordinating global crypto regulation, international regulations could become a reality within the next year. - Crypto, Alder said, is one of the three “C’s” that has skyrocketed up the governments’ agendas, in addition to COVID-19 and climate change.
FINANCIAL POWERHOUSE: Japanese investment bank Nomura began trading cryptocurrency derivative contracts this week, joining rivals including Goldman Sachs (GS) and JPMorgan (JPM) in giving clients a way to access the crypto market. The company launched over-the-counter cryptocurrency derivatives with BTC non-deliverable forwards and non-deliverable options for clients in Asia out of Singapore. - In Brazil, XP (XP), the largest brokerage by market value in the country, is planning to launch “XTAGE,” a crypto trading platform, by the end of June. The new feature would allow 3.5 million users to buy and sell BTC and ETH, though crypto deposits and withdrawals won’t be available in the beginning.
- Finally, cryptocurrency infrastructure provider Teller Finance, is looking to expand the use of decentralized finance (DeFi) platform by offering USDC holders the opportunity to lend capital to a travel insurance company.
ROBO-WENT ROGUE: The FBI has arrested and charged Eddy Alexandre, 50, of Valley Stream, N.Y., for his alleged role in a crypto pyramid scheme that duped investors out of $59 million. - According to a criminal complaint, Alexandre told investors he could double their money within five months, promising 5% weekly returns via some secretive robo-advising technology.
- The “robo-adviser,” however, went rogue and spent $15 million of investor funds on personal expenses, stashing Alexandre’s personal bank accounts and spending $170,000 purchasing luxury cars.
–Fran Velasquez and D.K. |
Overheard on CoinDesk TV... |
"In the long run, this may be exactly what the industry needs to clean and clear out some of the non-stable elements in the business." –Michael Coscetta of Paxos, on UST and LUNA's fall and the future of the industry, on CoinDesk TV's "First Mover." |
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Circle CEO Jeremy Allaire: There needs to be more regulatory framework around stablecoins (CNBC) -
Can blockchain smooth global supply chains? (Financial Times) -
Bitcoin mining in Norway gets the green light as the proposed ban rejected (Cointelegraph) -
Ukraine’s Digital Transformation Ministry approves charity NFT project benefiting war efforts (The Block) -
MicroStrategy's bitcoin bet turns negative, triggering $330 million paper loss (The Block) -
Tax Investigators Identify Potential $1 Billion Crypto Ponzi Scheme (Bloomberg) -
Crypto billionaire Sam Bankman-Fried: ‘I got involved with no clue what a blockchain was’ (Financial Times) -
Carbon removal hype is becoming a dangerous distraction (MIT Tech Review)
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Putting the news into perspective |
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The Human Cost of Lunatic Hubris As the collapse of the Terra ecosystem enters its final, definitive stages, signs of the real-world wreckage caused by the flawed virtual project are impossible to miss. On social media and message boards, former LUNA backers are reporting huge losses, despair and hopelessness. Secondhand reports suggest a rash of suicides and attempts. It's a sobering moment for those of us in the crypto-watching business. I’ve spent a great deal of time over the last two years trying to highlight absurdities in the bubbly crypto market (including predicting luna’s failure), but I still find myself somewhat shocked by just how exposed civilians became to one of the most experimental projects in the industry. And to be explicit, the crypto industry is still best thought of as entirely experimental. The scale of the loss is, in one sense, easy to understand: It is total. The Terra ecosystem has entered a hyperinflationary “death spiral.” This fallout was baked into the network’s supposedly stabilizing algorithm, and LUNA will continue to asymptotically approach zero. The UST algorithmic stablecoin price, currently at 18 cents instead of a dollar, will crumble towards zero as well. That wipes out roughly $68 billion, the combined paper value of LUNA and UST at the end of last week. Exchanges continue to facilitate trading in the tokens, a decision with murky ethical implications. The scale and severity of individual losses is harder to grasp. As a thought experiment, cut LUNA/UST’s total supply cap in half to account for the internal holdings of ecosystem projects and assume outside investors held an average of $20,000 in UST or LUNA before the crash. Dividing $34 billion by $20,00 implies 1.7 million holders lost what 99.9% of the humans on Earth would consider a life-changing amount of money. Those weren’t all real dollars because many bought LUNA below the May 12 price peak. But paper losses can still be devastating, and many folks did lose real money, particularly those who bought supposedly “stable” UST to farm the 20% yield on the system’s heavily subsidized Anchor lending protocol. The signs of deep and widespread distress have been mounting all week. Matthew Graham, a crypto VC noted for his accessibility online, reports getting a wave of despairing messages from those caught in the broken system’s catastrophic unwinding. Police have reportedly been called to protect Terra founder Do Kwon’s home in South Korea, where angry investors have reportedly been threatening his safety. The darkest reports are of people contemplating or following through on self-harm. In a tweet that is no longer public, one former LUNA partisan going by @terranaut3 claimed to know of at least eight people who have taken their own lives in the days since the unwind. The Terra subreddit is full of reports of suicides and attempts, links to mental health hotlines and dire reports of financial immolation. Most of that was posted before the forum was locked two days ago, when LUNA was still trading at hundreds of times its current price. CoinDesk hasn’t confirmed these stories, but they seem all too plausible. Here to help I am not a counselor, but for anyone in this position one key practicality: Declaring bankruptcy is a far better option than harming yourself. That’s particularly true in the U.S., where bankruptcy laws in some states could protect you from seizure of your home or automobile. Crypto washouts aren’t new, but these reports of despairing LUNA holders are novel in one way: a huge number of “normies” appear to have been suckered into buying UST and LUNA. For most of the time that I’ve spent in crypto, the bulk of the money in the system came from people who were actively engaged with crypto ideals or technology, or from investors and traders with big risk appetites. The 2020-2021 crypto craze was much bigger and had much wider retail reach, so its fallout will be fundamentally different from the deflation of the 2018 crypto bubble. We can certainly expect to see a rush of regulatory scrutiny in response, but crypto insiders should also take time to reflect on whether their behavior has put retail speculators at unnecessary risk. High on the list of examples here is crypto fund manager Mike Novogratz, who famously displayed a huge LUNA tattoo in January and declared himself “officially a Lunatic.” Reports have since surfaced that Novo’s fund actually exited LUNA by March, but if he ever disclosed that walkback it didn’t get remotely the traction of his bullish flag-waving. From the outside, that looks an awful lot like pump-and-dump behavior, in spirit if not substance. The other shift I hope to see out of this mess is a lot more humility, critical thinking and serious openness to contrary opinions. Before the death spiral began at the start of the week, about 17,000 CoinDesk visitors read my April 22 piece outlining the scenario for LUNA’s failure that ultimately played out. If just a few dozen of those readers took steps to protect themselves before that failure actually happened – heck, if even one reader did – that’s what I’m here for. The next time you see critics and skeptics dismissed as FUDders, attacked and dismissed, just remember: We’re here to help. Let us. –David Z. Morris |
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Infrastructure, Signing Authority and Governance: The Atlas We Need to Navigate the Trilemma?* “Trilemma” is the term used to describe the tradeoffs between three essential qualities that must reside at the heart of any blockchain-based system design: decentralization, security and scalability. Vitalik Buterin, who put forward this idea in 2019, suggested that efforts to enhance any one of the three will diminish a blockchain’s ability to deliver one or both of the others. Lately, the industry has seen hacks expose the underlying weaknesses of implementations with poor trilemma design. The recent Ronin hack is a crystal clear demonstration of the trilemma in action – and of the catastrophic effects that not paying heed to it can have. Continue reading here *This is sponsored content from Atlas. |
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