Top Terra Whales Break Silence on Network’s Collapse

Some of the largest investors in the Terra ecosystem, including Galaxy Digital, Delphi Digital, and Pantera Capital, have commented on Terra’s implosion that transpired last week.

Top Terra Backers Reflect on Network’s Demise

Some of Terra’s most prominent backers have shared their thoughts on the project’s devastating implosion. 

On Wednesday, a few days after Terra’s $40 billion collapse, some of its largest investors and most vocal backers finally broke silence and shared their reflections on the incident. 

In a letter to shareholders, partners, and the wider crypto community, Galaxy Digital CEO Mike Novogratz, who famously got a LUNA-themed tattoo when the token hit $100, described Terra as “a big idea that failed.” 

Novogratz commented on his ink in the note, saying it “will be a constant reminder that venture investing requires humility.” He also blamed the challenging global macro backdrop and crypto’s cyclical nature for the debacle. As of December 31, 2021, Galaxy held around $400 million worth of LUNA. At its peak, LUNA was one of the biggest cryptocurrencies, changing hands for $119. Today, it’s worth fractions of a penny. While Novogratz didn’t share whether his fund lost any money on its LUNA investment in the letter, a May 13 statement from Galaxy revealed a quarter-to-date net income loss of around $300 million. This represents a decline of 12% versus the fund’s March 31 net asset value, indicating the loss likely originated from LUNA’s collapse.

Delphi Digital, a notable cryptocurrency research firm that also runs a venture investments arm, also published a blog post Wednesday revealing that the fund lost its entire position in LUNA. Delphi said its investment initially represented 0.5% of the fund’s net asset value in early 2021 and eventually rose to around 13% of net asset value at peak LUNA prices. 

“We understood the risks of the algorithmic model upfront and sought to be transparent about them throughout; however, it’s clear we miscalculated the risks,” Delphi said in the post, adding that it was “currently sitting on a large unrealized loss.” Delphi Research, which reportedly operates under the same Delphi brand but separately from Delphi Ventures, has so far published six reports on the Terra ecosystem, mentioning the risks of UST de-pegging and the possibility of a “death spiral” scenario that eventually transpired last week.

However, despite clearly outlining the risk in its research reports, Delphi came under heavy fire from the crypto community on Twitter after its team members vocally supported the ecosystem and defended UST’s stabilizing mechanism in the lead-up to the collapse. “To the vocal critics of Terra’s algorithmic design–you were right, and we were wrong,” the team admitted yesterday.

Pantera Capital, the world’s largest crypto hedge fund with over $5.6 billion in assets under management, appears to have fared better than both Galaxy and Delphi on its LUNA bet. According to Pantera’s co-chief investment officer Joey Krug, the fund had sold most of its LUNA position over the last year before Terra entered its death spiral. “We managed that [LUNA] position down over time as it became increasingly profitable/large, in order to maintain a diversified portfolio,” he said on Twitter yesterday.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.