Luna's Inventor Mocked Critics, and 'Lunatics' Lost Everything

Do Kwon built a faithful following despite critics' doubts about Luna's underpinnings
By Mike L. Ford,  Newser Staff
Posted May 18, 2022 3:40 PM CDT
Luna's Inventor Mocked Critics, and 'Lunatics' Lost Everything
   (Getty - Ridofranz)

In April, Do Kwon—founder of Terraform Labs—tweeted a picture of his newborn daughter with the message, "My dearest creation named after my dearest invention," Luna cryptocurrency. On May 13, less than a month later, he tweeted, "I am heartbroken about the pain my invention has brought on all of you." As the New York Times reports, it was an uncharacteristic expression of humility for the "trash-talking crypto bro." But there certainly was plenty of pain when Luna nosedived from its peak of $119 in March to approximately zero. Investors lost over $40 billion on Luna alone, and the crash rippled across crypto markets.

In Luna’s downfall, the Times sees "a case study in crypto hype and who is left holding the bag when it all comes crashing down." Some big firms lost big bucks, but many of Terraform’s initial investors sold early and reaped massive profits; legions of faithful, fervent retail investors ("Lunatics") were hit hardest. Martin Baumann of CMCC Global said his firm sold in March, when the price was about $100 per coin, because "we had gotten increasing concerns from both the tech side as well as regulatory side." Critics have voiced those concerns for years, but Kwon mocked his detractors. Per Business Insider, when a British economist warned of an impending crash, Kwon replied, "I don't debate the poor … and sorry I don't have any change on me for her at the moment."

Much of the underlying problem involved Luna’s sister currency, TerraUSD, a "stablecoin" that also tumbled. Unlike other stablecoins, TerraUSD’s was not pegged to hard assets like US treasuries; instead, it relied on algorithms linked to Luna itself, making it exceptionally risky and opaque. As crypto prices sagged and Terra started to go below $1, Luna saw its own value erased. Kwon did have a backup plan through his nonprofit Luna Foundation Guard, which stockpiled $3 billion in Bitcoin as a backstop. Per CNBC, that stash was traded last week in a desperate, failed bid to save TerraUSD. But perhaps it's not over; the Economic Times reports that Kwon unveiled the "Terra System Revival Plan" earlier this week. (Read more cryptocurrency stories.)

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