The CEO of one of the largest cryptocurrency platforms shared his take on the collapse of Terra (CRYPTO: LUNA) and the stablecoin TerraUSD (CRYPTO: UST) associated with it.
What Happened: In a Twitter Inc (NYSE: NYSE:TWTR) thread, FTX co-founder and CEO Sam Bankman-Fried shared that “not all bad things are the same bad thing.”
The thread came partially in response to a Coindesk article that asked if Terra co-founder Do Kwon was the Elizabeth Holmes of cryptocurrency, comparing him to the former founder and CEO of Theranos.
Holmes was found guilty of fraud in 2022 for her role in the company's demise.
“The core accusation against Holmes isn’t that Theranos failed. Startups fail all the time. The accusation is that she lied,” Bankman-Fried said.
Bankman-Fried said that Homes said Theranos was doing specific things that it wasn’t doing.
“The fraudulent behavior was her pretending to investors that one type of test was another. Luna is different.”
Bankman-Fried said the Luna and the UST stablecoin mechanism wasn’t misinterpreted, rather it was very transparent from the beginning.
“I think it was transparently going to falter at some point. Do Kwon obviously stood by it, morally and in terms of press, long after he should have backed off.”
Related Link: If You Invested $1,000 In Terra (LUNA) On Jan. 1, 2022, Here's How Much You'd Have Now
Why It’s Important: Bankman-Fried said he won’t condone the behavior of Do Kwon, but wanted to make sure that the comparisons were fair and the comparisons to Holmes were unjustified.
“Luna was a case of mass enthusiasm, excitement, and – frankly – marketing and memes – driving people to believe in something which was going to falter according to publicly available information,” Bankman-Fried said.
The FTX CEO said there will be comparisons of Luna to a Ponzi scheme, but those are also unjustified, as “most bad investments aren’t ponzi schemes.”
Bankman-Fried compares four investments that have lost over 50% of their value in 2022 year-to-date: Netflix Inc (NASDAQ: NASDAQ:NFLX), Terra (LUNA), AMC Entertainment Holdings (NYSE: AMC) and Ark Innovation ETF (ARCA:ARKK).
“NFLX went up a lot and then down a lot, and is a real company. LUNA went up a lot and then down even more, and had a very transparent but also a very bad problem. AMC went up a lot and then down a lot, because memes got more and less popular. ARKK is a combination of those.”
The comparisons between Terra and public stocks that have lost a significant amount of value could show the risks involved in both the stock market and cryptocurrency market. Cryptos and stocks go up and down and often times can lose value for investors.
Price Action: Terra is trading at $0.0001367 at the time of writing.
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