TerraUSD founder Do Kwan criticized for market-wide crypto meltdown

Terra co-founder Do Kwon (right, with Daniel Shin) is compared to convicted fraudster Elizabeth Holmes after his crypto venture collapsed, sparking a wider market crisis

Terra co-founder Do Kwon (right, with Daniel Shin) is compared to convicted fraudster Elizabeth Holmes after his crypto venture collapsed, sparking a wider market crisis

Do Kwon, the mastermind behind the failing cryptocurrencies TerraUSD and Luna, is facing criticism and criticism after the collapse of his venture sparked a massive collapse in the broader crypto market this week.

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

Thanks in part to his big personality and confident pitch, Kwon was able to attract high profile investors, including the venture capital arm of major exchange Coinbase.

But after TerraUSD de-pegged from the dollar this week, trading as low as 23 cents amid panicky sales, it sparked a wider collapse that sent the largest cryptocurrency, Bitcoin, to its lowest level since 2020.

Issuer Luna fell more than 99 percent in value on Thursday, trading at well below one cent, down from a high of $120 last month.

Now, a columnist for the industry news site CoinDesk calls Kwon “the Elizabeth Holmes of crypto” in a stark comparison to the convicted fraudster who drove billions of investors away.

Terra co-founder Do Kwon (right, with Daniel Shin) is compared to convicted fraudster Elizabeth Holmes after his crypto venture collapsed, sparking a wider market crisis

Terra co-founder Do Kwon (right, with Daniel Shin) is compared to convicted fraudster Elizabeth Holmes after his crypto venture collapsed, sparking a wider market crisis

Terra co-founder Do Kwon (right, with Daniel Shin) is compared to convicted fraudster Elizabeth Holmes after his crypto venture collapsed, sparking a wider market crisis

TerraUSD was said to trade 1-to-1 with the US dollar, but this week 'de-pegged' the dollar and traded as low as 23 cents amid panicky selling

TerraUSD was said to trade 1-to-1 with the US dollar, but this week 'de-pegged' the dollar and traded as low as 23 cents amid panicky selling

TerraUSD was said to trade 1-to-1 with the US dollar, but this week ‘de-pegged’ the dollar and traded as low as 23 cents amid panicky selling

Kwon’s image has also not been damaged by his longstanding habit of denouncing his critics as ‘poor’ and, a little over a week ago, his cheerful remark in an interview that there is ‘entertainment in watching companies die’. .

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

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

“At least he makes a great impression of a man who really believes in what he’s selling,” Morris wrote of Kwon.

“Despite piles of critical reviews of Luna’s fundamental structure, Kwon not only stayed on track, but has cornered in the past 24 hours to find more capital to flush through the holes in his sinking flagship,” the columnist added. to. “He’s a long way from admitting that he made the holes there when he built it.”

The meltdown in TerraUSD, one of the world’s largest stablecoins, rippled through cryptocurrency markets on Thursday, sending another major stablecoin Tether below its dollar peg and sending bitcoin to 16-month lows.

A columnist for news site CoinDesk calls Kwon (above) 'the Elizabeth Holmes of crypto' in stark comparison to convicted fraudster

A columnist for news site CoinDesk calls Kwon (above) 'the Elizabeth Holmes of crypto' in stark comparison to convicted fraudster

A columnist for news site CoinDesk calls Kwon (above) ‘the Elizabeth Holmes of crypto’ in stark comparison to convicted fraudster

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Kwon has a habit of dismissing his critics as 'poor'

Kwon has a habit of dismissing his critics as 'poor'

Kwon has a habit of dismissing his critics as ‘poor’

Stablecoin TerraUSD has been hit by the turmoil and broke its peg to the US dollar, dropping as low as 31 cents on Wednesday. On Thursday, it traded around 47 cents.

Stablecoins are digital tokens that are pegged to the value of traditional assets, such as the US dollar.

But TerraUSD is an algorithmic, or “decentralized,” stablecoin and had to keep its dollar peg through a complex mechanism where it was traded with another free-floating token.

“The collapse of the link in TerraUSD has had some nasty and predictable spillovers. We have seen broad liquidation in BTC, ETH and most ALT coins,” said Richard Usher, head of OTC trading at BCB Group, referring to other cryptocurrencies.

Even stablecoins backed by traditional assets showed signs of stress on Thursday.

Tether slipped below its $1:1 price, hitting a low of 95 cents around 0724 GMT on Thursday, based on CoinMarketCap data.

“Tether’s lack of transparency about the quality of the commercial paper they hold to support the pin made it the obvious next target,” said Usher of the BCB Group.

“Tether is a very different animal than Terra, however, with a more proven ecosystem and I’m much more confident that when the volatility decreases it can regain its firmness and stability,” he said.

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Paolo Ardoino, chief technology officer of Tether, said in a Twitter Spaces chat that the stablecoin had reduced its exposure to commercial paper over the past six months and now holds most of its reserves in US Treasury bonds.

Ardoino said a quarterly update on Tether’s reserves would be available later this month.

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

The large number of centralized cryptocurrency exchanges and decentralized locations, each with their own liquidity profile and credit risk, contributed to price distortions in the market, said Denis Vinokourov, head of research at Corinthian Digital Asset Management.

“The spillovers to other stablecoins are partly caused by the fragmented nature of the market,” Vinokourov said.

“This credit risk, especially in times of tight liquidity conditions and massive deleveraging, is leading to further price distortions.”

Market players are still assessing the impact of TerraUSD’s problems on investors.

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

Source: New feed