Galaxy Digital CEO Mike Novogratz is breaking his silence more than a week after Terra (LUNA) collapsed wiping out billions of dollars according to Dailyhodl.
Novogratz says that the tightening of monetary policy by central banks contributed to the collapse of Terra (LUNA), a blockchain protocol focused on issuing algorithmic stablecoins.
“This macro backdrop put pressure on Luna and the reserves held to back UST. UST’s growth had exploded from the 18% yield offered in the Anchor protocol, which eventually overwhelmed other uses of the Terra blockchain. The downward pressure on reserve assets coupled with UST withdrawals triggered a stress scenario akin to a ‘run on the bank.’ The reserves weren’t enough to prevent UST’s collapse.”
According to Novogratz, the collapse of the native token of the Terra blockchain, LUNA, and its flagship algorithmic stablecoin, UST, has reduced confidence in decentralized finance (DeFi) and crypto markets in general.
“In Luna and UST alone, $40 billion of market value was destroyed in a very short amount of time. Both large and small investors saw profits and wealth vanish. The collapse dented confidence in crypto and DeFi.”
The Galaxy Digital CEO, however, says that blockchain and cryptocurrency technology is here to stay.
“Crypto is not going away. The amount of human capital moving into the space isn’t slowing down. The focus on building decentralized infrastructure that allows value and ownership to flow as freely as information on the internet, isn’t slowing down. The GDP of the metaverse is heading one way. Our community is resilient, has a shared belief in a new way of doing things, and the assurance that this is the very early innings.”
Galaxy Digital invested in Terra (LUNA) in the fourth quarter of 2020 using capital from its balance sheet. Novogratz, who inked the word LUNA on his arm in January, now says that the tattoo will serve as a “constant reminder that venture investing requires humility.”