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A number of UST investors, such as VC firms, suggest that judicious moves prior to the price crash saved them from incurring heavy losses.
According to venture capital firm Pantera Capital, its investment in LUNA grew a hundred-fold in the run-up before the crash. Pantera Capital saw its initial investment sum of $1.7 million climb to a massive $170 million fortune. This amount starkly contrasts the combined $60 billion value that was erased from the marketplace because of the LUNA and UST price plunge. According to Pantera’s co-chief investment officer Joey Krug, the venture capital firm sold around 87% of its primary LUNA fund between January and April. Furthermore, Krug explained that his platform’s ‘losses’ were limited to only around 5% of their overall position. The Pantera CEO ascribed the company’s LUNA liquidation to risk management and fund rebalancing.
Two other venture capital firms Hack VC and CMCC Global also stated that they were unaffected by the crash. The duo exited their LUNA positions in December and March, respectively, effectively dodging the bullet. However, both Hack VC and CMCC did not specify how much profit they made before they closed their LUNA positions.
Substantial Number of UST Investors Not so Lucky
Before its crash, many considered UST a controversial stablecoin due to its lack of fiat reserves. Instead, the stablecoin relied on algorithms created and dispensed by its creator Terraform Labs. UST’s complex algorithmic process entailed an overdependence on computer code. Terra relied on the computer code for self-stabilization of value, as well as supply and demand control.
After surging past $116 in April and seeing UST maintain its dollar peg during that period, LUNA eventually plummeted in early May. At the onset, the LUNA Foundation Guard tried to keep the UST afloat by plowing virtually all of its Bitcoin (BTC) reserves into the market. However, the $3 billion worth of BTC could not save UST or LUNA as investors pulled out in a panic. The effect further worsened the situation and sank LUNA even deeper. Eventually, LUNA became valueless with the UST and LUNA crash costing the market some $60 billion.
A lot of affected investors eventually began counting their losses and were considering the financial repercussions of the plunge. Grievances ranged from some losing potential tuition money to losing a large chunk of investment money from personal property sales. One user on Reddit even considered suicide after suggesting that the lost funds were earmarked for marital life. The Reddit post read:
“I’m lost, about to commit suicide in a chair. I lost my life savings in the investments of (LUNA UST) the worst thing is that 3 weeks ago I proposed to my girlfriend. She doesn’t know anything, I lost 62 thousand dollars. I’m here I don’t know what to do.”
The team behind Terra has activated a new plan to save the blockchain. The plan involves distributing new “Luna Classic” tokens to old users.