Billions Lost in the Terra Collapse: Here are the Ongoing Effects as Bitcoin Sees Red

Billions Lost in the Terra Collapse: Here are the Ongoing Effects as Bitcoin Sees Red


A new day is upon us, and there are many things happening.

  • Prices: Bitcoin and other major cryptos continue their downward spiral while stocks had a good day.
  • Insights: Long after the Terra Collapse, people still feel its effects on their investment economy.
  • Technician's take: Soon, the market will likely undergo a brief relief bounce. This happened in late February and March, so it's not out of the question that we could see something similar again soon!


Bitcoin (BTC): $29,267.51; -3.50%

Ether (ETH): $1,973.97; -4.04%

Biggest Gainers

Ethereum Classic (ETC): $21.87; +3.05%

Biggest Losers

Algorand (ALGO): $0.4167; -6.36%

Solana (SOL): $49.69; -7.08%

Internet Computer (ICP); $7.75; -7.39%

Stocks Rise But Cryptos Fall

Correlation has gone missing.

Cryptocurrencies continued their recent trudge through the red gloom of a bear market on Monday, with major coins seeing increased volatility and lower prices. At the other end stocks spiked.

As of Tuesday morning, the bitcoin price has fallen almost 3.5% over the past 24 hours to a low end of the $29,000-$30,000 range it occupied for nearly two weeks since the UST stablecoin and LUNA token that supports it Imploded. The cryptocurrency has fallen 26% from its high this month near $40,000 and roughly 55% since reaching a record peak last November. Ether on the other hand was down approximately 4% over this same period and trading at $1,973.

Crypto markets were not immune to investor fears about inflation and a possible recession as central banks tighten monetary policy. AVAX recently dropped over 9%, GALA lost 8%. ALGO fell 6%, while MANA saw its value decrease 8%.

The head of research for 3iQ Digital Asset Mark Connors told reporters that they're rangebound because there have been no major events to shake up the markets recently, which is leading investors into uncertainty about inflation rates and their effect on cryptocurrency prices.

"We don't have earnings [this week}, we haven't had a stablecoin lose $48 billion, and we haven't had a Presidential Executive Order," Mark Connors

On the other side, stocks have been treading a different path. Senior executives at JPMorgan Chase have said that the U.S consumer credit market is in good shape short term, sending stocks higher in hopes this news will spark an economic recovery across America!

The S&P 500, which spent most of Friday in bear market territory meaning that it was trading at least 20% lower than its previous high, has increased by 1.8% as of Tuesday morning. The markets seem to be gaining momentum, with the Dow Jones Industrial Average and tech-heavy Nasdaq climbing 1.9% and 1.5%, respectively, this week after falling almost 3% last week.

Cryptos have spent much of this year tracking stocks, but now they're breaking from their traditional pattern. The latest separation represents at least a slight twist in the evolving relationship between these two familiar entities – crypto and stock markets!

3iQ's Connors said that the digital assets will likely remain rangebound at least until early June when a report from the U.S Bureau of Labor Statistics is expected to be released showing if inflationary pressure is reducing. He said that markets are still uncertain for now due to a few people pushing them in either direction. But he doesn't think we'll see any breaks no matter how things turn out.


S&P 500: 3,973 +1.86%

DJIA: 31,880 +1.98%

Nasdaq: 11,535 +1.59%

Gold: $1,853 +0.4%


The ongoing damage to Terra investors continues with no end in sight.

The devastating destruction of the Terra protocol has meant a significant hit on all its investors' balance sheets. Data about this Carnage can be found in block explorers, including Korean VC firm Hashed's staked tokens which were once worth over $3.5 billion at one point during peak demand before crashing down.

Hashed is most likely in the clear, thanks to its investment in Terraform Labs. As long as they got their tokens through investing on this platform and not by purchasing them directly from luna or anyone else who had custody at one point during its existence- Hashes stock shouldn't suffer too much damage!

But liquid crypto funds are more interesting than cash because they have the potential for higher returns with less risk.

The significance of the crypto on the VC's balance sheet — and why it matters so much for Hashed – can be seen when we take a look at how Singapore's Three Arrows Capital made a $1.2 billion position (using January 2021 pricing) in Grayscale Bitcoin Trust GBTC).

The Singapore-based asset management firm Three Arrows Capital is licensed to manage assets of not more than SGD250 million (US$181M) for its entity there, according to a filing with the Monetary Authority. The company also has an entity in the British Virgin Islands with which it's split GBTC equally, according to U.S SEC filings. Even the 50-50 split would exceed the amount that Three Arrows Capital is authorized to manage. This likely happened through leveraging bitcoin, as the bitcoin is an option to buy into GBTC. Three arrows wanted to do this because it sees GBTC as a potential harvesting play, exploiting its current discount with the hope that one day it will be worth more or at least return to market value.

The shares of Three Arrow's GBTC have shown that this was not a smart investment because markets were down throughout most parts of 2022, and GBTC's structural problems made things worse. Let's return to Hashed and the other VC firms that held Terra's tokens in their liquid portfolios.

Some firms may have used their collateralized LUNAs as security for leveraged purchases of further tokens, both to trade them on the exchanges and also to invest in funding rounds that utilize Simple Agreement For Future Tokens (SAFT) or another investment vehicle. An agreement with an over-the-counter desk that pledged staked LUNA for crypto to buy into the SAFT would be a simple task. Once the lockup period of a specific token was complete, funds could repay through gains on those tokens without touching any cash positions at all! So when a fund takes a massive hit on its token portfolio, it has far-reaching consequences for everyone in the ecosystem.

Now, post-LUNA there will be billions less in dry powder available for VCs to deploy even if their cash positions are relatively sound.  The implications of this could be huge!

Antalpha Technologies Managing Director Max Liao is convinced that even with the recent bear market, institutional investors will not be scared off. He points out how in the 2000s dot-com bubble many companies died as fast as they were being born but this gave us Amazon (AMZN), Google(GOOG), and PayPal.(PYPL).

According to him, the events of the past few weeks have only underscored that due diligence and risk management are also critical factors in executing successful venture investment. He told reporters If we want to make real change in this world, then it's important for emerging protocols and potential investors alike to remember that businesses should learn from both their own success as well as the failure of others.

Entrepreneurs and builders should be prepared for a change in the structure of their next investment, which may involve more cash than tokens.

Technician's take

Source: Coinmarketcap
Source: Coinmarketcap

Bitcoin's value has been volatile in recent days, but it seems to be holding steady between $28,500 and $30,000. With support at $27,000, which has been keeping some buyers around. BTC declined by as much as 3.5% over the past 24 hours.

This is an interesting observation. It seems like momentum has improved on the daily chart, just as it did back in late February and March of this year. Price is looking like it could be in for a relief bounce after falling further into oversold levels on the daily chart. The RSI continues to rise, pointing toward an opportunity if the price can grab some momentum soon enough. The daily RSI will have to rise above 50 in order for this bounce to last.

The weekly chart shows that the RSI is currently most oversold since March 2020, but momentum signals remain negative which suggests there could be a limited upside for Bitcoin in this initial phase. Instead, it seems likely we'll see settlement near the $33,000 – $35,000 resistance zone first before anything else happens

On the weekly chart, the RSI is the most oversold since March 2020, although momentum signals remain negative. That suggests the upside could be limited for BTC, initially toward the $33,000-$35,000 resistance zone.

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