The Luna Collapse

As at 4pm SG Time on 11 May 2022, $Luna is trading at <$5 and UST <$0.40.

Pretty epic price action since $Luna was trading at ~$90 as recently as four days ago.

Basically, someone or some party found a loophole in the LUNA/UST mechanism (defended with BTC) and coordinated a pretty successful attack on the ecosystem. Dump UST, short BTC and LUNA, wait for a depeg, long UST again in anticipation of a defense and then rinse and repeat again. Serious money was made this way, at the expense of most retail.

The pareto distribution curve is absolutely extreme in crypto. Probably 2% makes most of the money and 90% of participants get rekt. Sifugate, Cronje and now Luna. One rug after another.

As at this moment in time, UST has depegged drastically and it’s total mayhem on the blockchain.

It is always the most dangerous when things appear “safe”. I actually added to my UST position on Anchor when Hodlnaut declared that they were ready to accept UST on their books. Relying on others to do my research this time round did not pay off. In the end, where does the 20% yield comes from? People like me who did not exit the Ponzi in time.

$Luna is one of my biggest crypto position, so this experience is indeed painful. At ATH prices of around $120 a couple of months ago, I could have locked in a 6-digit profit. Not life-changing money, but definitely not an amount that I could easily waive off.

When I woke up yesterday morning to find out that $Luna had dropped 40% from $65 to $40 overnight, I was paralysed with inaction. Probably could have salvaged a nice 5-digit capital if I sold my liquid $Luna then and then waited for the 90 cents UST repeg that happened in the afternoon to sell my remaining UST.

On hindsight, I realised I lack nimbleness in the markets and cannot react quickly to new information and reassess my risk/reward ratio. Especially on positions where I have moved further out on the risk curve. 

The willingness to “hold to zero” has cost me more than rewarded me in the crypto space. Coins like $GB, $GEIST and $VADER come to mind as I experience repeated 50% drawdowns. 0.5^3 is not a great mathematical experience in the financial markets, my friend.

The consolation is that I am getting slightly better at taking profits with each crypto cycle. On April 2021, I barely took 10% off the table. From Nov 2021 to March 2022, I managed to sell off 20% of most of my BTC, ETH, AVAX and of course, LUNA positions.

But still, it has not prevented me from being back in the red again and hopefully this post will serve as a reminder to myself to take more profits the next time I ever feel euphoric again.

Back to stoically DCA-ing index funds, BTC, ETH and USDC again.

To those nursing huge losses (whether it’s in tech/china stocks or crypto), I sincerely hope it is not irreversible damage. To those that want to ape in and buy the dip, please do so responsibly and do keep in mind there is more to life than wealth or numbers on the screen.

Thanks for reading.