Mike Novogratz Ends Twitter Silence, Shares Take on UST/LUNA Crash

The Galaxy Digital CEO confirmed that his company had been taking profits on its Terra holdings this year.

AccessTimeIconMay 18, 2022 at 6:06 p.m. UTC
Updated Apr 14, 2024 at 10:46 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

Mike Novogratz, founder and CEO of crypto merchant bank Galaxy Digital (GLXY.TO), on Wednesday posted a public letter describing his perspective on the plunge in LUNA and UST.

"After much thought, it's time to talk about the last week and, more importantly, the weeks ahead," said Novogratz, returning to Twitter for the first time in 10 days.

  • The 'Real Question' About Sam Bankman-Fried's Trial is What Happens Next: Kevin O'Leary
    00:36
    The 'Real Question' About Sam Bankman-Fried's Trial is What Happens Next: Kevin O'Leary
  • How Decentralization Cultivates Community
    05:08
    How Decentralization Cultivates Community
  • Opening the World of Transactions
    05:06
    Opening the World of Transactions
  • Diving Into DeFi to Navigate the New Wave of Finance
    05:20
    Diving Into DeFi to Navigate the New Wave of Finance
  • The tweet links to a longer letter in which Novogratz reminded readers that it has been a "brutal macro backdrop" for all risk assets in 2022, with any number of growth stocks down 50%-70%, core crypto assets like bitcoin (BTC) and ether (ETH) off nearly 60%, and altcoins lower by an average of 80% from all-time price highs. The central banks, he said, are turning off the monetary spigots that contributed to a massive liquidity bubble.

    Novogratz: "This macro backdrop put pressure on luna and the reserves held to back UST. UST’s growth had exploded from the 18% yield offered in the Anchor protocol, which eventually overwhelmed other uses of the Terra blockchain. The downward pressure on reserve assets coupled with UST withdrawals, triggered a stress scenario akin to a 'run on the bank.'"

    The "flash-crash" in Terra and UST, said Novogratz, reinforced – among other things – the need to take profits along the way. Galaxy did just that, he added – something that had been alluded to in a filing earlier this month.

    While remaining highly bullish on the outlook for crypto, Novogratz said those hoping for a "V" bottom in the market are likely to be disappointed. "It will take restructuring, a redemption cycle, consolidation and renewed confidence in crypto. Crypto moves in cycles, and we just witnessed a big one."


    Disclosure

    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Stephen  Alpher

    Stephen Alpher is CoinDesk's managing editor for Markets. He holds BTC above CoinDesk’s disclosure threshold of $1,000.


    Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.