Galaxy Digital’s Novogratz Breaks Silence On UST/LUNA Fiasco
Mike Novogratz, founder and CEO of financial services and investment management firm Galaxy Digital on Wednesday posted a public letter discussing his views on the LUNA and UST crash.
Novogratz tweeted:
“After much thought, it’s time to talk about the last week and, more importantly, the weeks ahead.”
After much thought, it’s time to talk about last week and, more importantly, the weeks ahead. https://t.co/m2pnzpe9Lu
The tweet links to Novogratz’s letter addressed to wide audience from shareholders to friends. According to Novogratz, it has been a “brutal macro backdrop” for all risk assets in 2022, with any number of growth stocks down 50%-70%, core crypto assets like Bitcoin (BTC) and Ethereum (ETH) off nearly 60%, and altcoins lower by an average of 80% from all-time price highs. The central banks are turning off the monetary spigots that contributed to a massive liquidity bubble, he noted.
“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.'”
According to the investment expert, the fast down spiral of Terra and UST, reminded us – among other things – that we need to take profits along the way. Galaxy did that, he added – something that had been alluded to in a filing earlier this month.
Novogratz remains very bullish on the outlook for crypto market, but noted that those hoping for a “V” bottom in the market are most likely going to be disappointed.
“It will take restructuring, a redemption cycle, consolidation and renewed confidence in crypto. Crypto moves in cycles, and we just witnessed a big one.”
