I Lost $250,000 With Luna... Here's What I Learned

I was in Hawaii when it happened. I was like on a beach and then, uh, like Luna crashed and I was like, went to like literally zero. And I was like, oh man. And like for a day or two I just like, um, like it like kind of fucked up my vacation in a way, but not because I was like doing something. Like I didn't even have access to my— like my wallet's not just like on in the cloud. So like, I just wasn't home. I couldn't even sell if I wanted to. I couldn't do anything really. Um, and then I didn't even want to be doing something. I was like, I want to be enjoying this vacation, you know, whatever.

Tell me what happened. Can you tell me, like, you had told me, you're like, Luna's kind of cool. And you were, you told me like 6 or 8 weeks ago.

Yeah, actually. So I did something cool too in the last few days. You'll see it come out. I, I, I went really over the top with a piece of content. I haven't done this since I did that Clubhouse thread that was extremely over the top, but I was like I kind of find this entertaining and this might hit. And the Clubhouse one like really hit, hit like, I don't know, like 20 million people saw that thing. I did that again with the Luna stuff where I recorded— I basically am creating like a, um, almost like a John Oliver style show, you know, his show Last Week Tonight or whatever, where he just kind of like dismantles one topic for like 15 minutes and it's like, but it's peppered with jokes. I did that on the Luna thing, so that's gonna come out last day or two.

But that was a very fun exercise to try to Like, so tell me what happened.

You try to be funny, but the story is, I guess for those who don't know. Okay, so here's the short— here's the short version of the story. Short version of the story is you have Bitcoin gets big, has this like anonymous creator, and it's supposed to do like one thing really well, which is like basically this like digital gold. And then you have Ethereum gets really big and it's got this guy Vitalik. He becomes the next cult hero. First it was Satoshi for Bitcoin, then it becomes Vitalik. And Vitalik solves a major problem with Bitcoin, which is that he makes it programmable. And Ethereum takes off and Ethereum's more programmable form of money. But both Bitcoin and Ethereum have like one major problem, which is that they're not very good as actual currencies, right? They're called cryptocurrencies, but you don't use them as a day-to-day currency. You don't use them to go buy stuff. And this is for like a variety of reasons, right? Like Bitcoin, if you try to spend it, you'll get taxed as if you just sold a home every time you do a transaction. and then the merchant doesn't want it because they're like, oh shit, but tomorrow this is going to go down 20% in price. Like, dude, I'm not trying to invest. I just need money to pay for tomorrow's inventory. Like, I don't want to take this in my coffee shop. And so it's not really you. Those aren't really you. So basically there's this idea of creating stablecoins, which is a coin that's always going to be worth $1. And like, this is the spoiler. It's like, you know, you don't want it to not be worth $1, which is what happened with, with the Terra project. But like, you know, it's supposed to be worth $1. So the way that most people did it, the big ones, USDC, Tether, those are the two big ones. They're like, it's basically like a, like a, like a safety deposit box. You give them a real dollar, they'll give you a digital dollar. And if you ever want your real dollar back, they're like, I promise it's in the bank vault. Whenever you need it, come back and redeem it. And, and those kind of have some controversy because crypto people don't like it because it's like, well, how do I know you're not lying? Like, how do I know you didn't just take all that money in the bank vault and go spend it or invest it in some risky way? And that's why people think Tether did, uh, does. And, um, and also they're like, dude, what if the government just cracks down this one company? Like, they could just— like, they have to operate in some country.

Yeah, like, it's centralized. The whole— it's— yeah, it's centralized. This decentralization thing isn't real in that point.

So, okay, so that's the pro— so the pro argument for this project that came out— that's the project called Terra, and one of their currencies called Luna. So the idea was we need a decentralized stablecoin, we need decentralized money.

Does that mean that one person invented Terra and then another person invented Luna using Terra's technology.

No, no, Terra is like the name of the company, Terraform Labs. It's like a group of people who came together, said we're going to create a stablecoin. And then the stablecoin, one of them, like, it's called UST. So think about it like the US dollar version of Terra, UST. And so that was their stablecoin. That's the thing that's always supposed to be $1. Luna is the— like, Luna's the thing that backs it. Okay, so remember I said like the— in the other version, what backs the digital dollar? It's a real dollar in a bank account. And the way that the US dollar used to work was, what backs the US dollar? Gold in Fort Knox, right? And that was before we got off the gold standard. But the idea is like, what gives this currency any value is this like backing currency. And so they were backing it with Luna, and Luna was meant to be this like— it's like two— they, they basically created two coins, the stablecoin and then Luna, which goes— which can actually go up and down in price. As a stabilizing mechanism for the stablecoin. So whatever, these are some details, they're not super important to the— to what actually happened.

So, but it was one guy, right?

Because I saw like, oh, there's like an Asian founder, but like there's a team, right? There's a— it's a company. Okay, just like a startup, right? Mark Zuckerberg, that's this guy Do Kwon.

Got it.

So Do Kwon, who's Do Kwon? He's a pretty interesting character, right? Because he basically— it's like Stanford computer science, uh, graduates, he starts working on some like mesh networking internet thing like that was his first startup. And then he's like, oh no, crypto is like the future. I'm going to create the stablecoin project. So they come out with this idea and there's basically some people are skeptical because they've seen this decentralized stablecoin, this, this uncollateralized decentralized algorithmic, a bunch of buzzwords, but that's how you describe it. Stablecoin failed before. There was a project like this called Basis Cash maybe 5 years ago, and Basis basically raised like, I don't know, $80 million or something like that from like tier, like I don't know, Andreessen Horowitz, a bunch of other VCs, but they didn't even launch. They were like, they were like, oh, like that, we don't know if this algorithmic thing will, will hold. So they kind of returned 85% of the money as like a failed project. Um, so that was like the last big version of this that had come out. And then Terra comes out. And so Terra, the difference was they were like, look, this works as long as there's demand for the stablecoin. And so they were like, where's the demand come from? And at first This is, I guess I said it was a short version. This is actually the long version of the story. But at first he came out with a, with this idea that was like, look, we'll use it for e-commerce because in e-commerce every time there's a transaction, you know, there's like a 3% credit card fee basically. We can do it at 1% if we use crypto. And so it's like for a merchant, that's like, you know, that's real money that you get to save if somebody uses this, this, this option. And what they did was they're like, yo, we'll pass the savings to the customer and to the merchant. 50/50. And then they like went and talked to all these e-commerce companies in Korea where they're from, and they got like 27 large e-commerce companies, including the second biggest one in, in Korea, to use them. So like, imagine like the, like not Amazon, but like let's say eBay. Yeah, they got eBay to use it. So everyone was like pretty hyped. They're like, oh shit, this is crypto with a real world, real world use case. Finally, like real world use case. This is—

and you were hyped on it.

I was hyped on it. And this guy, because he was on stage, he's like, look, crypto is full of a bunch of projects that have no real-world use cases and very low user bases. We have like a real problem that we're solving and we're going to— and we have real users. We have 2 million people using our payments app to do this in Korea. And I was like, wow, awesome, I buy in.

And then they started to get a little bit invested. Can you say you want to say?

I started, I started with $25K and then I had an opportunity to put in another $200K as part of like a bunch of VCs were buying, uh, Luna. Like, they invested in the company and they were got— they got to buy Luna at basically like a 40% discount to the market rate. So at the time was trading at like almost $100. We got to buy in at about just under $40, uh, but it was like locked up. Like, it was gonna be released over the number of years.

So you did that?

I did that. So I was like, oh dude, I like this project anyways. If I get to buy it 50% under market, like, hell yeah, sign me up. And also, like, these are all like tier 1, like, crypto investors. Like, these— I mean, they raised a billion dollars, right, from it, from from investors. So it wasn't like some random project. It was like, oh, well, these guys are smart, they're doing it. All right, like, that's— that validates my, my belief. Okay, I'm gonna go ahead and, and do this. And for a while, it looked like a genius move because Luna was trading at— I don't know, hit like $116. It was like one of the best performers last year, basically.

How much were you up by?

In about a year and a half, Luna went from under a dollar to $116. So it did like 100x in one year. I was in at like the kind of like the $30, $35 price point overall.

Uh, 40% of $30 or $30?

No, no, my, my price point, my actual price point was like $35 blended.

So then you were, you went, I was up 3 or 4x.

Yeah, exactly. My $250 was like $750 grand. I was like, oh great, it's doing well. And like, this was just the start. It was like, it was growing really fast. Like not just the price, but like, like the number of people buying the stablecoin was going up. Like it went like, I think the stablecoin had like, I don't know, $18 billion of TVL or something like that. So it had gotten pretty big, but they had— I kind of noticed, I was like, wait, they don't talk about the e-commerce thing ever anymore. And that's because kind of like didn't work. Like they basically, it was like working slowly, I think like merchants like kind of cared, but not enough consumers didn't really change their behavior. So it wasn't like a sexy growth story. I don't think it was working. They just stopped talking about it. And they started talking about like, so what they did was they were like, all right, no, instead we'll serve the crypto community itself with a savings rate. So a savings account. So basically there was a savings account on, on the network that was like, if you deposit your stablecoin here, you get paid 20% interest on your stable, stablecoin, which is like kind of amazing, right? Because like if I take my dollars, I go to Bank of America, I get—

Yeah, but that sounds like some Ponzi scheme shit.

It sounds like it, right? But it's not. I'll tell you why. So it was like, Bank of America gives you 0.02%. This was giving you 20%. And, and so a lot of critics said exactly what you said, which is, oh, this is a Ponzi. And I will argue it is not a Ponzi. It was even better than a Ponzi. So like, what's one up from a Ponzi? Okay, so a Ponzi is fucking stealing, basically. So Ponzi is customer A gives you money, you use that money to pay out customer B, then customer B gives you money because they have faith in it, use that money to pay out C and D. So you're taking one customer's money, you're paying out the other. This was even better. They just created a currency out of thin air, printed like a billion of it, then they, and then they just gave it away, right? Like, and like the market believes it had value.

So have you seen on, uh, what's that where they have Patty's, Patty's Dollars on? Yeah.

Patty's Bucks. Always Sunny.

Yeah. Patty's Bucks. It's Always Sunny. Yeah. That's exactly what happened. They just created their own currency and just collected the dollars.

In a way, that's what all currencies are, right? The US dollar, every country does this. They create their own currency and you, if If you believe it's valuable, then it becomes valuable. If you, if you cease believing it's valuable, then it devalues. And we see this in different countries. And that's what happened here. For a while, people believed it was valuable and they kept investing in it. Um, and two things happened. One was everybody knew that this 20% savings rate's not sustainable because what they were, okay, the, the reality, the joke that, that was my joke version of description. The reality was when they raised the billion dollars from investors, they basically were like, look, this savings rate is really good customer acquisitions. It's a marketing budget, just like, Uber subsidizes your rides. Like, why was an Uber ride back when we all started using Uber like $12 when a taxi would've been $28? It's like, because VCs were basically giving Uber money and they were losing money on the rides. And that's what, that's what Tera was doing. They were losing money on this savings rate, but they were getting a whole bunch of new customers. So like, they got like 4 million people almost to create wallets on the network. So it was like they were buying user acquisition. Now you could argue that was either dumb or not dumb, but it was, definitely unsustainable. And everybody kind of— anybody smart knew that that's unsustainable, but it's like, hey, look, I get rewarded for being early here. I'm going to get this subsidized earnings savings rate, and that'll go away as this gets more popular. But like, cool, that's my benefit for being early. That's how almost every crypto project works. And, um, it's almost as how many, many startups work as well. Investors subsidize the usage of your free product until it's big enough where they'll start to charge or raise prices.

To— and then to get to the kind of like— so get to the crash. I care, I care about your take on like what happened to you, but to get to the crash, what happened?

To get to the crash, okay, so all along the way people are like, hey, uh, algorithmic stablecoins, they only work when demand keeps going up. Once demand starts to fall, this thing will free fall. So yeah, you have demand right now, that's why everything looks good, but once this starts to fall, it'll create a death spiral, meaning once people stop wanting UST, Luna's price will go down. People will start— once Luna's price starts going down, people start selling Luna. And, uh, basically it's this like interplay between if, if UST either started to depeg, meaning instead of being worth a dollar it was worth 95 cents, people will not want it. They'll lose confidence in the, in the stablecoin. And then as they lose confidence, they'll, they'll sell, which will create more supply of Luna, which will cause the price of Luna to go down. And then that will cause even less confidence in the whole project, and it'll just death spiral. That was— this is the belief. And all along, this guy Do Kwon, who started off like, you know, seeming like this smart kind of want to change the world kind of guy, he'd become like kind of an egomaniac. And it was part of his persona. Like he was like a Donald Trump or Elon Musk style guy where if you were— if you disagreed with him, he didn't just say, you know, like, I agree, let's agree to disagree. Like he was like, I will shit on you. I will call you stupid and poor and like, I will make fun of you.

Is that literally what he said?

Yeah. He would call everybody stupid, poor, and he would basically say, you're all— they're all FUDsters, just spreading FUD, which is fear, uncertainty, and doubt, you know, and look, they've been wrong all the way so far. They're going to keep being wrong. And this is exactly what Elon did about people who were shorting his stock. He was like, oh, it's going to be the short burn of the century. You guys are going to look so stupid. And, and, you know, people are betting against them, people betting for him.

So anyways, yeah, but this guy forgot, like, the thing to make this work is you have to be right.

Exactly. And he was right for a while until— and by the way, it's really funny. There's one Twitter account that wasn't just saying, hey, this ain't gonna work. He's like specifically laid out a like 15-step plan of like, hey, look, I did the math. If somebody was motivated and had a billion dollars, they could destroy Terra, which is currently worth $40 billion. So they could— if you put up— if you had a billion dollars of sell pressure, I think you could crack the whole Terra project. Uh, it would have to be like a smart, focused person who would have to time it right. So, and that's ex— and basically he, he, he retweeted that, was like This is like famous last words. So he goes, man, this is the most beep R-word thing I've ever read on Twitter.

Well, billionaires, if you try to say retarded.

Yeah, really? Yeah.

What a dumb idiot. Why would he do that?

Did you call him a dumb idiot?

Well, like, but like, why would you—

What kind of dumb idiot would do such name-calling?

How can you— how can you speak like that when you're like this? Like, like, a CEO of like a—

that's just crazy. Donald Trump called Mexicans rapists and stuff, dude. This is like crazy. Like, people are crazy, they do crazy shit, and then they're basically— their fans, in his case were called lunatics, were like, yeah.

And then like, they thought that was cool.

Well, I don't know if they thought that specific wording was cool, but in general, his character— I mean, he renamed himself Stablecoin, he became a billionaire, he like got a million Twitter followers because he became a cult of personality similar to Elon.

God, what an idiot though.

So anyways, he tweets, and he's really an idiot because he go— he said This is the most R-word thing I've read on Twitter all week. And he goes, billionaires who follow me, please go ahead and try this. And sure enough, 2 weeks later or a week later, it's like, and try it, they did. So basically somebody or some group, it's not confirmed who it is. It's not confirmed also that there's a coordinated attack, but it does seem like it. People started, uh, somebody started dumping like a billion dollars worth of the stablecoin, which caused the peg to, to go down, right? When you have that much sell pressure, it won't stay worth a dollar. It slipped to 92 cents. And then it's— and then on, on top of that, they were also dumping Bitcoin, which was the reserve collateral that these guys are holding. So Bitcoin's price starts to go down, UST starts to break peg, people start to panic a little bit, and they also started withdrawing from— so they did 3 things. They took it out of Anchor, the savings protocol, So you saw $1 billion worth of whatever, like withdrawals. Then you saw them sell it. Then you saw Bitcoin price tanking and all of a sudden people started getting a little worried about, oh shit, is something bad happening to Terra? Let me just go ahead and sell. So more people start to sell. And so you see like $3, $4, $5 billion of sales happening in a very short period of time. And this also coincidentally or very planned happened right when they were doing like a kind of like imagine you're like, oh, I'm just, I'm moving houses right now. I was like, oh man, the doors are open, huh? Because you're the moving trucks outside. So the doors are open. That's basically what happened. They were moving all the liquidity from the liquidity pool from one to another. And so there wasn't much— there was less shock absorbers than you would expect when they started to sell.

It went from over $100 to what? What's it at now?

Less than a penny. Like fractions of a— what? Yeah.

Okay. So how much value was wiped out?

$40-something billion. $48 billion.

That is crazy. That is crazy.

Stablecoin went from selling— so that's Luna to Terra, the stablecoin, the UST was selling at, you know, it's a dollar, it's supposed to always be a dollar, it goes 92 cents, 85 cents. So I'm on, I'm on the beach in Hawaii and I'm just getting texts from Ben, yo, Terra's depegging. Um, and it's like, and then it goes down to 70 cents, then it shoots back up to 90, giving false hope for a second, and then it plunges to 65, 60, 50. And I think it's currently trading, I don't know, 15 cents to the dollar or something like that.

You're, you're, you're out $2.50.

I'm at 2, yeah, $2.25, something like that.

How does that feel?

I mean, it feels shitty, of course, right? Like, you know, what did your wife say when you're sitting in Hawaii? She doesn't really care to know, nor does she like want to know the details. I told her, I was like, well, from all of crypto, I was like, we lost several million, million dollars in the last like 3 months because crypto has just been selling off like crazy. And she's like, okay, so like, I shouldn't buy this bag, or I should? I was like, I think it's a shouldn't right now. Let's go ahead and hold off on that. I was like, the That's the level of conversation we've had about the whole thing. Like, she's not— she's, she stresses about micro stuff. Like, if we're— if we have like a late fee or a parking ticket, she'll freak out. But on the big things, she's like very chill.

She's like, but how do you feel about that now? Now that you've lost— you said, well, let's just say $3 million.

Like, I guess a couple feelings. The first was, I'm not surprised. Like, we went in pretty eyes wide open, which was, this is a risk-reward type bet. And you don't just say that. You have to like actually know what is the risk. And the risk was always Nobody's ever made an algorithmic stablecoin work. And by the way, one spoiler, this guy Do Kwon, turns out he was also the anonymous co-founder of Basis. That got leaked as well. So it's like, dude, fool us all once, shame on you. Fool us twice, what the hell is wrong with you? That's my take on it.

Did he tweet out like, I'm sorry, I'm a dick?

Or like, he's like, look, we didn't mean for this to happen, obviously. Because some people are like, dude, did you, did you benefit from this in some way? Like, because that happens in crypto. People will like raise a bunch of money, do a bunch of stuff, and then like run away with the money. His claim is, no, we didn't. Like, we lost more than anyone on this whole thing. I feel really bad that this happened. And he's kind of just like, you know, tail between his legs a little bit and he's sulking and he's quiet, much quieter now while everybody's like dancing on his grave, deservedly so, because he was cocky as hell, right? So like, that's what's going on with him. With me, it's sort of like All right, lost this money. That's not good, obviously. But like, you know, doesn't feel good. It's sort of jarring. Like, I've had startup investments go south, but it kind of happens over a longer period of time. This is like you wake up on Tuesday and like one of your best performing investments has gone to zero in 24 hours. It's quite jarring to watch the price drop like a knife, um, and be pretty helpless. Like, there's nothing you could really do about it, partially because my Luna tokens were locked up and partially because I was away from my computer. Uh, you know, so, you know, whatever.

But you're, you're, you're not— I would like, I mean, I would lose sleep over that. I would be like almost, almost not, uh, not quite scarred, but like a little bit. Like it would almost be a, it would be close to where I would describe it as traumatic.

Yeah. It's not that, um, for me. And again, I think it's because I, I mean, I write down whenever I do an investment, here's my, here's why I think there's a good investment and here's what could go wrong. And the what could go wrong was exactly this, which is like, People think that there could be— if, if there was a bank run, that this would death spiral. I see no reason that this wouldn't death spiral if there's a bank run. I don't know what would cause a bank run, but it's possible. And it's like, oh, what would cause a bank run? Was like, either a motivated player created panic at a time when the project was vulnerable because all the— all markets, stock markets, crypto markets are all down, and they were moving the liquidity, right? So it's like, well, the risk kind of played out. Like, that's okay. Like It's like, you know, it's like I've had pocket aces get cracked before, and I, I wouldn't even call Luna pocket aces. It's like I had a flush draw that got beat. Okay, you know, like to use poker terms, like I had a flush draw, I got beat. Like, that's what happens. Even if I was a— even if I had a 60% chance of winning, okay, I got my money in, good. But like, it wasn't my life savings. Now there's a lot of people who lost a lot more money on this because they put in a lot of money. So to me, there's also like a postmortem of like, okay, there's some rules. Like, you do— you don't put more than, you know, 15% in any one project. Because all of them have these like black swan risks. And so you never want to be that vulnerable to any one thing.

Is the majority of your net worth in crypto right now?

It was not until everything cut in half. Yeah.

Not, not including private, like not including private businesses. No.

Of the liquid stuff. No, it's a little less than half now. It's a little more than half before. So, you know, but like the stock market also hasn't done great. I don't know. I haven't really—

Dude, I've lost so much. I don't log into my thing anymore. I, I'm just, I don't even look at it.

Yeah. For me, I'm not going to do it. I'm not going to go trade right now. So, you know, for mental health purposes, I don't go calculate my net worth when it's, when it's so far down, you know, there is a good forcing function. I'm like, all right, great. Let me make sure I'm earning money, uh, working hard. Right. Like it was very easy when, when like over the last year, year and a half, let's say since the kind of COVID uh, you know, money printing system, I mean the whole 10 years have been a bull run or whatever, but like The last year and a half, like, shit just inflated like crazy. So it was like, oh man, do I even need to work? Like, I'll just look up every day and I made a whole year's salary in a day. Like, you know, it's kind of demotivating to work. And then this is highly motivating to work when you start losing a year's salary per day, you know, like that starts to, uh, you know, like add up. And so yeah, I don't know, like that's I guess my full reaction to it.

Me too, that's exactly mine as well. It's like you just Just make more money.

Yeah, yeah, exactly.