terra collapse

Stablecoins are a core part of the financial plumbing when it comes to cryptocurrency and digital assets. They promise that if you put a dollar in, you will always be able to get a dollar out.

But last week saw Terra, one of the largest stablecoins, lose its peg to the dollar and collapse. Investors are estimated to have lost over $40 billion in value. Ouch.

We dig into what happened, what might be the consequences for markets and whether stablecoins present a systemic risk to the economy.

And in the Dumb Question of the Week, we ask: What exactly is a Ponzi scheme?

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Disclaimer

This podcast is for informational and entertainment purposes and is not financial advice. We do not provide recommendations or endorse any decision to buy, sell or hold any security. We cannot be held responsible for any actions listeners may take and investors are encouraged to seek independent financial advice.

Copyright 2023 Many Happy Returns

The collapse of the Terra ecosystem, and the tokens Luna and UST, will go down as one of the most painful and devastating chapters in crypto history. Over $60 billion market value has evaporated, and numerous retail investors are nursing major losses. What's particularly bad is that this was a big project, championed by some of the most notable names in crypto. But some people obviously saw it coming, and understood it to be a disaster in the making. On this episode we speak with Kevin Zhou, the founder of the crypto hedge fund Galois Capital. He began warning about Terra publicly earlier this year, and was short Luna starting in early May. He explains the exact mechanics of the coin's implosion. 

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