The collapse of the Terra stablecoin and LUNA cryptocurrency was an earthquake that is still shaking the entire crypto market, but while it happened so fast, some industry executives say they issued earlier warnings about the structural faults in the Terra business model.
Lou Kerner, a partner at venture capital firm Blockchain Coinvestors, is one who says the flaws were obvious. He spoke at the Forkast+ NOW virtual event — Stablecoins: Beyond the Headlines, which was streamed on Tuesday from the World Economic Forum at Davos and hosted by Editor-in-Chief Angie Lau, with Forkast reporter Danny Park.
“It was a Ponzi strategy. They [Terra] said exactly what they were doing so you could see what they were doing and you could see how it would unravel eventually,” Kerner said. “You didn’t know when, but you knew at some point that it would unravel.”
Kerner’s view — which makes a distinction between a Ponzi scheme and a Ponzi strategy — aligns with those of Jeremy Allaire, CEO of Circle, which issues the second-largest stablecoin, USDC. Last week, Allaire said that his team had predicted Terra’s collapse six months ago, calling it a “house of cards” that was bound to fail.
Ponzi or not, the Terra collapse has left victims everywhere. Around US$45 billion was wiped out from the market cap of UST and Luna within a week. Twitter and Reddit forums are filled with stories of people who lost their life savings. Reddit forums have also pinned suicide…
