“With algorithmic stable coins, it's a little bit the same idea.” And these designs were complicated-they would have pulleys, they would have magnets, they would have levers,” Muci says. People wanted to figure out how to get free energy. “It is a bit like perpetual motion machines. It is also one that did not and could not work. If the opposite happened and UST’s price zoomed over $1 on crypto marketplaces, people would use their lunas to buy one-dollar-a-unit USTs on Terra’s blockchain and resell them on other platforms, bringing the price of UST down. If a sell-off of UST on cryptocurrency exchanges threatened to lower its price below $1, the idea was that smart arbitragers would rush to buy UST, and use them on its native blockchain to buy luna at a discount-propping up UST’s price in the process. That was supposed to keep its price stable by piggybacking on the work of arbitragers, investors who attempt to profit from market inefficiencies. A big chunk of the investment of around $60 billion in these cryptocurrencies was pulverized overnight, and more of it will follow as people scramble to get rid of their diminished coins.
UST has lost its peg to the dollar (at the time of writing, you can buy it on cryptocurrency exchanges for $0.58), and its sister asset luna has plummeted from $82 last week to $0.02. You can bet a lot of people do not feel like laughing today. “So far,” he said, “this story has always followed the most humorous timeline.” Only one of the investors seemed optimistic, out of nihilism rather than trust in terra’s solidity: He said that at some point UST’s price would grow well above one dollar per unit, and the coin’s promoters would decide to just keep it there and rebrand the stablecoin as an “inflation-resistant cryptocurrency dollar.” Another shrugged but conceded that all bets were off. The “Ponzinomics” of the project, they informed me, were just too risky.
Several of them were scoffing at terra, or UST, a stablecoin whose price equivalence to the dollar is underpinned by algorithms and game theory rather than cash or collaterals, and at the notion that it would maintain its peg in the long run. At a Mexican restaurant in North London a few weeks ago, a handful of small-time but remarkably discerning retail cryptocurrency investors predicted that terra and luna would crash.
Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. While the filings information is dated, they are closely watched for possible investment trends and potential future performance.īe smart with your money. Quarterly filings known as 13-fs are one of the few ways that funds are required to disclose their long positions, but may not reflect current holdings. In a letter to investors, the fund said it underestimated the impact of surging inflation but added it was making careful bets. Tiger cut its positions in Sea and Snowflake by 39.4% and 68.9%, respectively. Shares of e-commerce and gaming firm Sea Ltd are up 35% in that time frame, while Snowflake has rebounded 23%. Many of the shares it had sold have since rebounded in a rally that has seen the tech-heavy Nasdaq composite gain 18.8% in the current quarter.įor instance, Carvana’s shares more than doubled in price since the end of June, but Tiger sold its stake almost entirely. The firm did not immediately comment on the matter. It is unclear, however, what its strategy has been since then. Chase Coleman’s hedge fund saw its flagship fund fall 50% in the first half of the year, as worries over the Federal Reserve’s tightening monetary policy and surging inflation slammed many of the growth and technology stocks the firm held.
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