Terra Financial News

It’s not the greatest time to be a venture capitalist (VC) in crypto. Many of them have seen both the value of their investments and reputation plummet, as projects they were actively promoting, such as Terra, failed spectacularly, hitting the whole crypto industry. 

The founders of tainted crypto hedge fund Three Arrow Capital (3AC), which filed for bankruptcy in the first week of July, have finally resurfaced after five weeks of no known whereabouts.

There were at least three major factors that lead to the collapse of the fund, according to the founders of Three Arrows Capital (3AC) Su Zhu and Kyle Davies.

The South Korean prosecution service’s recent raid of 15 locations as part of the probe into the “Terra (LUNAC) incident” saw officers search the home of the Terraform Labs co-founder Daniel Shin.

South Korean crypto investment company Uprise plans to compensate investors for damages incurred during its futures bet on Luna Classic (LUNC) — a token that was built on the ruins of the failed Terra ecosystem. 

The South Korean government is set to come good on a promise to launch a new regulatory agency that will govern the domestic crypto sector in the wake of what it calls the “Terra (LUNAC) incident.”

Prosecutors in South Korea behind the investigation of Terraform Labs have reportedly executed a search and seizure in 15 firms, including seven crypto exchanges.

Ravi Menon, the managing director of the Monetary Authority of Singapore, or MAS, said companies often labeled by the media in connection to the recent market volatility as “Singapore-based” were not representative of the country’s approach to crypto regulation.

South Korean prosecutors have reportedly uncovered evidence of an obscure Terraform Labs subsidiary that appears to exist only “on paper.”

It’s been a century or so since the property qualification came out of vogue, but it doesn’t seem a problem if you want to apply it to crypto and policymaking. An advisory notice released by the United States Office of Government Ethics last week states that the de minimis exemption — which allows for the owners of securities who hold an amount below a certain threshold to work on policy related to that security — is universally inapplicable when it comes to cryptocurrencies and stablecoins. 

South Korean crypto investment startup platform Uprise reportedly lost around 99% of its assets worth about $20 million when it got liquidated shorting the LUNA token.

crypto exchanges, particularly the smaller ones, are on tenterhooks for survival. After Terra's debacle, Celcius and Three Three Arrows Capital jittered. This was followed by Vauld suspending operations. Meta (formerly Facebook) is shutting down its crypto wallet Novi by September 1, 2022. Even the Indian crypto exchanges are facing massive liquidity pressure, with volumes slumping up to 80 per cent since January. The new taxation rules are adding more pain to their sufferings.

crypto's all-for-one ethos was its biggest draw. Now panic is spreading across this universe — and that same ethos is posing what may be the biggest threat yet to its survival. What started this year in crypto markets as a “risk-off” bout of selling fueled by a Federal Reserve suddenly determined to rein in excesses has exposed a web of interconnectedness that looks a little like the tangle of derivatives that brought down the global financial system in 2008. As Bitcoin slipped almost 70% from its record high, a panoply of altcoins also plummeted. The collapse of the Terra ecosystem — a much-hyped experiment in decentralized finance — began with its algorithmic stablecoin losing its peg to the US dollar, and ended with a bank run that made $40 billion of tokens virtually worthless. Crypto collateral that seemed valuable enough to support loans one day became deeply discounted or illiquid, putting the fates of a previously invincible hedge fund and several high-profile lenders in doubt. The seeds that spawned the meltdown — greed, overuse of leverage, a dogmatic belief in “number go up” — aren’t anything new. They’ve been present when virtually every other asset bubble popped. In crypto, though, and particularly at this exact moment, they are landing in a new and still largely unregulated industry all at once, with boundaries blurred and failsafes weakened by a conviction that everyone involved could get rich together.

Galaxy Digital CEO Mike Novogratz has said that although he was “worried about the macro environment,” he was hoping bitcoin (BTC) “would stay in the USD 30,000 to USD 50,000 range.” At the same time, he argued that the model his once-favorite crypto Terra (LUNA) was built on was unsustainable.

Hacktivist group Anonymous has vowed to look into the actions of Terra (LUNA) co-founder Do Kwon since he entered the crypto space in a bid to expose his alleged crimes.

Hacktivist group Anonymous has pledged to “make sure” Terra co-founder Do Kwon is “brought to justice as soon as possible” in regards to the collapse of the Terra (LUNA) and TerraUSD (UST) ecosystems in May. 

Do Kwon, the co-founder of Terraform Labs has spoken out about the Terra 2.0 network, which was launched in the wake of last month’s devastating luna classic (LUNAC) and terraUSD (UST) crash.

South Korean prosecutors have banned an unspecified number of current and/or former Terraform Labs officials, including developers, from leaving the country.

It seems that tokenomics is in crisis. Where before a superficially deflationary monetary system was enough to draw in investors, the Terra collapse and the ongoing downturn have likely had an irreversible impact on the perceptions of traders, who now may think twice before throwing their money in with a coin that claims ‘strong tokenomics.’

In between, a nascent technocratic industry with grand ambitions to reinvent the financial system was rocked repeatedly by echoes of past crises in the old system. It was a week of margin calls, forced selling and important collateral being exposed as way too illiquid in a time of crisis. There were rumblings of hedge-fund blowups, tales of opportunistic predatory trading, job cuts and loud denials of problems from key players proven wrong almost immediately. Amid it all, the myth was shattered once and for all that this new crypto financial system was somehow immune to — or even able to benefit from — the economic fundamentals currently punishing the old system.

Crypto-focused hedge fund and venture capital firm Three Arrows Capital is considering the sale of remaining assets and even a bailout as it grapples with the prospect of insolvency in the wake of a violent collapse in digital asset markets.