As I write this piece, $LUNA is trading at $0.007632. For the uninitiated, this darling crypto traded at nearly $120 just a month a go. Call it an attack or someone exploiting a glitch in the economic model of the LUNA-UST, fortunes were made and destroyed in the past one week. As the dust settles down, the fallout of this catastrophe has left me with a few very important lessons that would go down with me in my journey in the cryptoverse.
Yes, I know you are interested in knowing how much I lost in this shit storm. Long answer short, I never invested in the Terra ecosystem. I follow a pretty simple theory:
“If a protocol can’t explain the source of the yield in one sentence, it is probably you!”
With that being said, I also sit on a portfolio that’s >50% down! Nonetheless, isn’t it all a part of learning? So let us figure out the top 5 things I learnt from the Terra blunder.
A. Maximalism? How about No?
Entire crypto industry is about a decade old now. Compare that with stocks. Bombay Stock Exchange was established in 1875. That is 15x more maturity, more regulation and more understanding of the trend than crypto markets.
What I am trying to say is that it is foolish to be a maximalist in such a nascent market. A few months ago, everyone thought Solana to be the Ethereum Killer. The entire narrative pushed Solana’s price to an all time high of $260.
What happened after that? Solana Blockchain had 6-7 instances of a total shutdown. Currently the price is 80% less than its ATH.
Same happened with our beloved LUNAtics. They bet everything on an even newer ecosystem in an already nascent market.
So next time you set up your investment portfolio, think rationally.
B. Discipline and Diversification:
I always follow a very strict approach when it comes to crypto investing. And my belief has strengthened after this chaos. Pick up the themes in the market. Say BTC, Utility Blockchains, ETH killers, Meta, GameFi etc. Simply diversify your portfolio amongst each of these sectors.
The amount of investment and the sectors should not be a function of market news. For eg. you might be tempted to invest in Ethereum all of a sudden because ‘merge’ is around the corner. But that’s not how you should think.
C. Impermanence:
$50bn. Yes. That’s the wealth which was completely eroded in the Terra blow out. For some perspective, that is equivalent to half the net worth of Mr. Ambani.
This made me think that nothing in this world is permanent. Your size does not define your longevity. Even the biggest of empires have turned to ashes and this will continue to happen. Even faster in the digital world.
D. Self Confidence != Arrogance:
Do Kwon, founder of Terra has been quite vocal about his viewpoint on Twitter. In the past he has
- Take bets with people that $LUNA will touch ‘X’ price. Which founder does that?
- Completely disregarded people’s research and concerns about flaws in the Terra ecosystem.
- Recently mentioned in the interview that it would be entertaining to watch 95% of the projects that will fail in this industry.
In a nutshell, he was creating more people who rooted for Terra’s failure. Terra ecosystem is a brilliant case study for someone to learn being grounded.
Finally:
Ups and downs are a part of this game. If you don’t win, you learn. It is indeed a great practice to draw life learnings from financial markets. Because what are they if not a reflection of our collective selves! Until next time.
How down is your portfolio btw?
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Until next time..
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