Terra crisis: Family bonds shattered, dreams ripped apart

Stock Market Today:

With last week’s Terra collapse wiping out $40 billion worth of investor wealth, cryptocurrency traders have been rattled and have lost any hope of recovering their money.

Terra is a public blockchain protocol that deploys algorithmic decentralised stablecoins that track the prices of currencies such as the US dollar and the euro. These include tokens such as TerraUSD, which is linked to the US dollar, and Luna.

The Terra cryptocurrency ecosystem suffered a massive blow around May 9. The Luna tanked almost 100 percent and the TerraUSD stablecoin lost its US dollar peg, which was priced at $0.00013 at the time of writing, according to data from Coinmarketcap.

Moneycontrol spoke to investors who had placed their bets on Terra Luna and most of them said they had lost all hope of recovering their money.

Hitesh Malviya, the founder of venture capital firm iBC Capital, said he had bought Luna at $4 the day before it was delisted and had invested an amount that he could afford to lose.

“I have zero hopes of recovery as my buying price was too high. The supply has increased drastically and even after executing the revival plan, its price cannot reach $1 again. It is, therefore, better to move on,” he said.

Crypto platforms such as Binance, CoinDCX, Coinswitch Kuber and Wazir X have delisted stablecoins TerraUSD and Luna after the collapse of the Terra blockchain, founded by South Korea’s Terraform Labs in 2018.

“It hardly matters if Luna continues to trade or not as it has reached a price that is nearly irreversible even if there is a miraculous recovery of the Terra network,” said another investor who lost a substantial amount. “While the token may have recovered 200 percent from its lows, people who invested in the range of $80-100 will never recover their losses.”

The investor claimed to have lost 50 percent of his portfolio due to investments in Luna and said the whole fiasco should be a lesson to investors to invest in blue-chip tokens Bitcoin and Ethereum, which are safer in the long run.

An investor in his forties ended up catching falling knives when the Luna fell in the range of $3-$4. He said he diluted long-term investments from other tokens saved for his daughter’s marriage and all his life savings evaporated in a matter of 48 hours.

“I have lost about Rs 15 lakh, all of which was saved for my daughter’s wedding… I have not even told my wife about this. I absolutely have no idea what will happen when she finds out all our money is gone,” he said.

Samina Haidry, an investor based in Mumbai, said she had reached a point of no return.

“When the crypto market was down, my investment was down to one-fifth of the original investment. Luna, however, witnessed a crash rarely seen in crypto markets. Since this was the fourth-largest crypto, I trusted and decided to sell all my coins and invest in Luna, expecting it to give huge returns. I am yet to overcome the shock of seeing my portfolio down to zero from about $5,000 just a week ago,” she said.

Experts said the tanking of Luna is a black swan event, rare but plausible and investors should learn a lesson from the event.

“Always understand that when we invest, we take a risk and we should be mentally prepared for that,” said Raj Kapoor, founder of the India Blockchain Alliance. “The second - review and hedge - always. We are sometimes convinced about a particular company and go either all-in or almost all-in investing in that company. A fatal error.”

He added that greed is another factor that investors should be wary about.

“The folks who bought Luna earlier in the year had already almost 3x by April, but they probably did not take profits hoping the black swan stock would return another few-folds in the next few months,” he said.

Historical data has shown that the market recovers and tends to even break new highs after enduring a bloodbath. Investors should learn these lessons to avoid future losses.