Galaxy Digital CEO Mike Novogratz breaks his silence more than a week after Terra (LUNA) collapsed, wiping out billions of dollars.
Novogratz says the tightening of monetary policy by central banks contributed to the collapse of Terra (LUNA), a blockchain protocol aimed at issuing algorithmic stablecoins.
“This macro backdrop put pressure on Luna and the reserves held to support UST. UST’s growth had exploded with the 18% yield offered in the Anchor protocol, which eventually overwhelmed other uses of the Terra blockchain. The downward pressure on reserves combined with UST withdrawals created a stress scenario akin to a run on the bank. The reserves were not enough to prevent the collapse of UST.”
According to Novogratz, the collapse of the Terra blockchain’s native token, LUNA, and its flagship algorithmic stablecoin, UST, has diminished confidence in decentralized financial (DeFi) and crypto markets in general.
“In Luna and UST alone, $40 billion in market value was destroyed in a very short time. Investors large and small saw profits and wealth disappear. The collapse has eroded confidence in crypto and DeFi.”
However, the CEO of Galaxy Digital says that blockchain and cryptocurrency technology is here to stay.
“Crypto is not going away. The amount of human capital going into space is not decreasing. The focus on building a decentralized infrastructure that allows value and property to flow as freely as information on the Internet is not slowing down. The GDP of the metaverse is going one way. Our community is resilient, has a shared belief in a new way of working and the assurance that this is the very first innings.”
Galaxy Digital invested in Terra (LUNA) in Q4 2020 with capital off its balance sheet. Novogratz, who? inked the word LUNA on his arm in January now says the tattoo will serve as a “continuous reminder that venture capital requires humility.”
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