Terra’s (Luna-USD) 2.0 network doesn’t seem to be fooling investors this time around. It debuted in late May following the dramatic collapse of the predecessor network. But the newest iteration is proving the old maxim that ends in “fool me twice, shame on me.” In other words, investors haven’t taken the bait this time around, with prices dropping immediately following this latest offering.
Prices dropped from $20 to $4 within 24 hours of the relaunch and are currently below $3 weeks later. Terra is little more than a cautionary tale at this point with CEO Do Kwon among the most unlikeable characters on the face of the planet.
But beyond the damage to his reputation, the premise underlying so-called stablecoins has been seriously undermined as well.
Terra Had Its Volatility Unchecked
The entire premise of stablecoins was to provide a means of checking the wild volatility that marks the cryptocurrency market. Many stablecoins are backed by cash and other assets that peg their price to that of the U.S. dollar or any other fiat currency.
Terra, however, was pegged to UST, which was backed not by real assets, but rather by algorithms and incentives meant to ensure traders would maintain its price.
After Terra’s spectacular collapse, stablecoins have been dealt a serious blow. Terra’s collapse not only called into question the premise of stablecoins, but also reignited claims that the entirety of the crypto space is little more than a Ponzi scheme predicated on lies.
With legacy cryptos including Bitcoin (BTC-USD) continuing to trade low, it’s fair to assert that crypto isn’t what it was.
Philosophical questions aside, the really interesting question now becomes this: What will happen to CEO Do Kwon as things continue to unravel?
Kwon in Trouble
One of the funnier aspects of the entire aspect is how much investors have learned about Do Kwon the person. None of it has been flattering. A pattern emerged in which he would resort to calling anyone poor who criticized him or his project.
It seems that he doesn’t react well when faced with adversity. That continues to prove true as Kwon was attempting to ignore a subpoena served by the Securities and Exchange Commission in 2021 on the grounds that those papers were served unlawfully. He claimed that his lawyers did not give the SEC permission to serve those documents but they were aware the SEC was planning to. It seems instead that Kwon was simply refusing to cooperate with those orders.
Terra is little more than a cautionary tale at this point. The company’s efforts to relaunch the network look to have failed. The notion of a stablecoin is also in question. And Do Kwon is emerging as a less than likable character.
The article originally published on Investor Place.