Crypto Terra Luna Crash Loses $40 Billion | News or Noise

Mid-last week, the latest and largest failure to date in the crypto space transpired. It centered around a cryptocurrency called “Luna,” which was theoretically backing a controversial stable coin named TerraUSD.

I’m Chris Perras, Chief Investment Officer with Oak Harvest Financial Group. And This is our investment team’s mid-week release when we examine a news item, headline, or story making the rounds from publicly available sources, and ask, “Is it News or Noise?” This week’s topic is last week’s crypto and “stable coin” crash centered around a cryptocurrency called “Luna.”

Call me ignorant, but before Wednesday of last week, I thought “Luna” was a mediocre “energy bar” that cost about $1.25. Little did I know that Luna has been around for about four years. This was the second go-round for the same experimental idea from a fellow named Do Kwon. He has the pedigree of most young Silicon Valley visionaries. He’s a Stanford dropout.

The first time this idea failed years ago, his investors lost around $50 million if my internet sources are correct.

Well, this time around, Do Kwon found the backing of Galaxy Digital Investments and Mike Novogratz. At its peak early last week, the same idea of an algorithmic stable coin, sent the network value into the 10s of billions in bitcoin! Well, that was before Wednesday last week.

Terra was designed to trade reliably at the value of exactly one U.S. dollar; however, it plummeted to 29 cents on Wednesday morning. Luna crypto was down 99 percent since its highs last month. Here’s the chart. No, that’s not your eyes playing tricks on you. The chart basically shows a vertical drop, like falling off the K2 summit. More than $40 billion in wealth — a large part of it from retail investors — was gone in a matter of hours. The shock of this collapse sent the price of other coins falling to its lowest point since July, exposing how a coin labeled a Ponzi scheme by its critics had impacted the larger market in digital assets.

I bring this story up because over the last four years, we’ve been asked if we invest in bitcoin “assets” for our clients. The answer has been and remains, no, not of our own decision. While we are fascinated and excited by the future of blockchain technology, digital assets, and the metaverse, we find few if any, investment vehicles that produce current cash flow for investors to value. To our investment team, it remains the wild wild west of speculation and early venture investing. If clients want to make such wagers, we plan for them within their financial plan; however, we advise clients to invest and manage them on their own as it Is currently outside our area of understanding and expertise. And from the rapid decline and massive losses of Luna and the Terra network last week, it appears it’s beyond the expertise of many others out there as well.

Is this investment news? For sure. Is it investment news for portfolios constructed here at oak harvest for clients? No, it should not be.

Give us a call to speak to an advisor and let us help you craft a financial plan that meets your retirement goals. Call us at (877) 896-0040, we are here to help you on your financial journey into and through your retirement years.

I’m Chris Perras and from Everyone here at Oak Harvest Financial Group, have a great week!

 

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