For an outsider, the cryptocurrency world is a mystery. The rise and fall of crypto have captured the imagination of investors, and there are hundreds of inspirational rags-to-riches stories. However, for an insider like Do Kwon, things are very different. The crypto mystery is created, and in this case, probably fabricated by the CEO of Terraform Labs, Do Kwon.
Did Terra and Luna’s Collapse Lead to Crypto Meltdown?
Terra collapse was one of the most significant events in the crypto industry. It was possibly the trigger that caused distrust among investors. As a result, we can now see cryptocurrencies such as Bitcoin, Ethereum, and even Shiba Inu suffering big time. We all know that the cryptocurrency market runs on sentiments, projections, and even celebrity involvement (in the case of DOGE, Shiba Inu, NFTs, etc.). So, when TerraUSD collapsed, it sent shockwaves across the market.
Why did Terra and Luna Collapsed?
Terra collapse was surprising because it was built up as a stablecoin. People knew it as a coin that could withstand market pressure because of the peg. So, how can a currency with such strong potential and backing from the biggest names in the industry fall flat on its face ? The answer: Lack of Transparency. The peg was synthetic at best. Unlike other cryptos, Terra was algorithmically pegged to the dollar.
Lack of transparency and a shortage of knowledge among investors was the primary reason TerraUSD and its sister token Luna peaked and disappeared into oblivion. After rising to $80, it plummeted rapidly to under $1 in the event that is now called tokenMt. Gox 2.0.
Terra USD was Never Really a Stablecoin
Unlike other stablecoins, Terra crypto relied on the quality of its code to maintain the peg for stabilizing the cryptocurrency. Although there were few doubts about coder competency, Terra suffered because of the lack of transparency in its incentivization. Even in 2021, there were critics of Terra. They showed the public how a wealthy investor with a US $1 billion fortune could attack the Terra algorithmic model and pulverize the so-called crypto into submission.
Who Attacked Terra?
For the uninitiated, TerraUSD was created as an algorithmic stablecoin. It is worth noting that it was never in the same league as Tether (USDT) or USD Coin, which always holds 1 US Dollar in cash, traditional financial assets, or treasury bills. The fact that such assets did not back TerraUSD ultimately became the reason for its collapse. Although it is still unclear if the attack was coordinated or initiated by a single person, it occurred despite the indicators provided by experts. Therefore, Do Kwon, Terra’s founding father, and CEO, is in the spotlight.
The Jury is Out on Terra CEO Do Kwon
Do Kwon, the CEO of Terraform Labs, had denied the rumors about him taking out $2.7 billion for himself before the Terra stablecoin project collapsed.
In the past, Do Kwon has promoted himself as a messiah who doesn’t care for money. Despite being alerted to TerraUSD’s vulnerabilities, Do Kwon stayed arrogant and dismissed the development as a minor blip.
After being blamed for Terra’s collapse, Do Kwon has stated that he lost his own money during the collapse.
Do Kwon claims that he postponed withdrawing the founder’s tokens as he wanted to avoid a possible conflict of interest?
Do Kwon is not happy with his critics and calls them to be ‘poor’ in their analysis. He says he is not a fan of ‘money’ and has not done what the Twitter users say.
Due to the collapse, some investors have lost their entire life savings. A surgeon in Massachusetts, Keith Baldwin, has lost over 90% of his savings in just a few days after the TerraUSD collapse.
The $60 billion wipeout of Terra USD has stirred up questions regarding the accountability of the cryptocurrency and stablecoins.
The scale of Terra’s financial tragedy has enraged people from around the globe. Famous statisticians like Nassim Taleb say that Do Kwon is even more menacing than scammers like Bernie Madoff.
On 9th June 2022, another version of Luna Token that was meant to bring life to the dead project has nosedived to its lowest low at $2.1
Considering the fiasco of Terra, crypto investors need to wake up to the risks of cryptocurrencies. It is tough to guess developer’s intentions behind a new crypto, so it is investors’ responsibility to read through the relevant whitepaper before investing. We understand that there can be a lot of technicalities behind which the scammers can hide. So, if you are unclear about some text or feel a lack of transparency, it is advisable to stay away from that cryptocurrency. Currently, some people are asking for Do Kwon to do jail time, which is highly unlikely. It is also impossible to say if he took out the $2.7 billion for himself. Whether Do Kwon is responsible or not for the fiasco, we would probably never know. But the sufferings of Terra investors are real. So, we must learn from the lessons provided by the TerraUSD debacle and invest smartly in the future.