TerraUSD founder Do Kwan faces criticism for market-wide cryptocurrency meltdown


Do Kwon, the mastermind behind the crypto failures TerraUSD and Luna, is under scrutiny and criticism after the collapse of his project triggered a massive crash in the broader crypto market this week.

Kwon, 29, is the bold CEO of Terraform Labs, the company behind the two related technologies: the stablecoin TerraUSD, which is supposed to trade 1-to-1 with the US dollar, and the governance token Luna, which is supposed to ensure stability. exchange rate.

With his big personality and confident presentation, Kwon has been able to attract prominent investors, including the venture capital arm of the main exchange Coinbase.

But after TerraUSD ‘depegged’ the dollar this week, trading as low as 23 cents amid panic selling, it triggered a broader crash that sent the largest cryptocurrency, Bitcoin, to its lowest level in a year. 2020.

The issuer’s value, Luna, plunged more than 99 percent Thursday, trading at less than a cent, down from $120 last month.

Now, a columnist for the industry news site CoinDesk Kwon has been dubbed the “Elizabeth Holmes of cryptocurrency” in a scathing comparison to the convicted fraudster who plundered investors for billions.

Terra Do Kwon co-founder (right, with Daniel Shin) is compared to convicted fraudster Elizabeth Holmes after his crypto venture collapsed and led to a broader market crash.

Terra Do Kwon co-founder (right, with Daniel Shin) is compared to convicted fraudster Elizabeth Holmes after his crypto venture collapsed and led to a broader market crash.

TerraUSD is supposed to trade 1 to 1 with the US dollar, but

TerraUSD is supposed to trade 1 to 1 with the US dollar, but is ‘de-pegged’ with the dollar this week, trading as low as 23 cents amid panic selling

Nor was Kwon’s image helped by his longstanding habit of dismissing his critics as “poor,” and just over a week ago, his cheerful comment in an interview that there was “entertainment in watching companies die.”

A Kwon spokesperson did not immediately respond to a request for comment from on Thursday afternoon.

In a scathing column on Thursday, CoinDesk writer David Z. Morris compared Coon to both Holmes and notorious Enron CEO Jeffrey Skilling, who was convicted of fraud in that company’s collapse.

“To say the least, he makes a wonderful impression on a man who truly believes in what he is selling,” Morris wrote of Kwon.

“Despite the plethora of critical evaluations of Luna’s infrastructure, Kwon has not only kept track, but over the past 24 hours has sought to find more capital to clear holes in his sunken flagship barge,” the columnist added. “He’s close to admitting that he put the holes in there when he built them.”

The crash of TerraUSD, one of the world’s largest stablecoins, spread across the crypto markets on Thursday, pushing another major stablecoin Tether below its dollar peg and sending Bitcoin to a 16-month low.

Columnist for industry news site CoinDesk calls Kwon (above)

A columnist for industry news site CoinDesk calls Kwon (above) the “Elizabeth Holmes of Crypto” in a scathing comparison to a convicted crook

Kwon has always dismissed his critics as

Kwon has always dismissed his critics as “poor”.

Stablecoin TerraUSD has been turbulent and broke its peg to the US dollar, bringing it down to 31 cents on Wednesday. On Thursday, it was trading at 47 cents.

Stablecoins are digital tokens that are tied to the value of a traditional asset, such as the US dollar.

But TerraUSD is an arithmetic or “decentralized” stablecoin that was supposed to maintain its peg to the dollar through a complex mechanism that involved exchanging it for another free-floating token.

The collapse of TerraUSD’s currency peg has had some pretty bad and predictable repercussions. Referring to other cryptocurrencies, Richard Usher, head of OTC trading at BCB Group, said: “We have seen massive liquidations in BTC, ETH and most ALT coins.

Even stablecoins backed by traditional assets were showing signs of fatigue on Thursday.

The cord fell unpegged to the dollar at 1:1, reaching 95 cents at around 0724 GMT Thursday, based on CoinMarketCap data.

“The lack of transparency Tether provides about the quality of the commercial papers they hold in support of the peg makes it the obvious next target,” said Usher of BCB Group.

“However, the Tether is a very different animal than Terra, with a much more stable ecosystem and I have much more confidence that when the volatility subsides, it can regain its bond and stability,” he said.

Tether’s chief technology officer, Paolo Arduino, said in a Twitter Spaces chat that the stablecoin has reduced its exposure to commercial paper over the past six months and now holds the majority of its reserves in US Treasuries.

Arduino said a quarterly update of Tether’s reserves will be available later in the month.

Tether, is the largest stablecoin by market capitalization and, along with USD Coin and Binance USD, accounts for approximately 87% of the total stablecoin market of $169.5 billion, according to CoinMarketCap.

The large number of centralized and decentralized crypto exchanges, each with its own liquidity and credit risk profile, was adding to price distortions across the market, said Denis Vinokourov, head of research at Corinthian Digital Asset Management.

“The spillover effects on other stablecoins are partly driven by the fragmented nature of the market,” Vinokourov said.

“This credit risk, especially in times of challenging liquidity conditions and collective deleveraging, leads to further price distortions.”

Market players are still evaluating the impact of TerraUSD troubles on investors.

In its semi-annual Financial Stability Report on Tuesday, the US Federal Reserve warned that stablecoins are vulnerable to investor inflows because they are backed by assets that could lose value or become illiquid in times of market stress.

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